Bitcoin Volatility Puts Miners Under Pressure 290
An anonymous reader writes "The virtual currency Bitcoin lost 21 per cent of its value yesterday, equating to a total loss this year of 44 per cent. Reports have suggested that this rapid fall is squeezing computer supporting systems and is raising alarm about its future viability. Bitcoin's value fell to $179.37, 85 per cent lower than its record peak of $1,165 at the end of 2013. In total, nearly $11.3bn has been lost in Bitcoin's value since its 2013 high. The decline has raised concern for Bitcoin 'miners' who support the transactions made in the digital currency, and whose profits become squeezed as its price falls against traditional currencies." The Coindesk article in the linked story gives a blow-by-blow on yesterday's valuation drop; right now, Bitcoin has jumped back up and stands at just over $216.
Bitcoin (Score:4, Interesting)
Just another commodity rip off scam. We need a medium of exchange that stands by itself, not subject to speculations of the 'market'.
Re:Bitcoin (Score:5, Insightful)
What many forget is that bitcoin is not a regulated market. That means no one pulling the plug to let people calm down. There is no value other than the dollar against it. The dollars value against other currencies has strengthened over the past year. So in relation to bitcoin you are going to see lower prices with it. Bitcoins value is only in other dollars (with a few exceptions). What do I mean by that? If you buy something with bitcoin it will be in relation to the current value in the local currency. Stronger external currencies will mean weaker purchasing power for bitcoin.
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What many forget is that bitcoin is not a regulated market. That means no one pulling the plug to let people calm down. There is no value other than the dollar against it.
That is not, strictly speaking, true. It is only true in the context of a grossly irrational market (like the current U.S. stock market, which is very far from rational and therefore subject to outrageous bubbles).
In a rational market, the stable price of any commodity will be slightly more than the cost of production + distribution. Bitcoin was originally designed to have very little cost of distribution, so this boils down to little more than the production cost. And make no mistake: production cost of
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What many forget is that bitcoin is not a regulated market.
So it's a libertarian's wet dream, then. All the downsides, then are just "the price of doing business" in the wild free market. Right? Is this a great country or what?
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Yet also the reason many have them.
This experiment isn't done yet.
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I'd rather my currency not change in value more an investment in penny stocks. Maybe it will smooth out once the final blocks are mined out but I won't be holding my breath.
Last year's $1,000 coin is this years $200 coin (Score:4, Informative)
A medium that doesn't deflate value by randomly printing more paper.
Does it matter if the value deflates due to printing as in the dollar case, or a lack of interest or lack of faith as in the bitcoin case? Last year's $1,000 bitcoin is this years $200 bitcoin. Why would the public care about the cause rather than the result?
That said I agree that bitcoin is useful as a mechanism to transfer value, as a transaction method, but as a store of value it currently fails. Its totally subject to consumer (goods/service buyer) and investor sentiment, merchant (goods/service seller) sentiment is irrelevant since merchants accepting bitcoins generally immediate convert them to dollars, euros, etc to avoid holding risks.
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Tying currency to a physical substance (gold) only makes it easier for outside organizations to manipulate that currency since they can play with the values and availability of stockpiles of said substance outside of your control. Granted, this can of course still occur with an abstr
Scams are specific to models ... (Score:2)
Because thats an awesome idea, make it easy for some organization to artificially inflate the value of a currency by running ads on TV and the internet about how you should invest in some precious metal, creating fake demand.
No, not at all. When the currency represents an amount of gold there is no such speculation or hedging. You already have gold, that US Dollar represents a certain amount of gold sitting in the US Treasury.
Tying currency to a physical substance (gold) only makes it easier for outside organizations to manipulate that currency since they can play with the values and availability of stockpiles of said substance outside of your control.
No. When the currency is gold based then the gold is typically under the control of the government, physically possessed by the government. Private stockpiles would be dwarfed by the government treasury and would only exist at the government's pleasure. At any time a government could seize a private stockp
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Re:Bitcoin (Score:5, Insightful)
Just to get this straight: your financial planning is based on taking your entire ~75 year life's savings and, in preparation for a 1/1600 year flood, invest it in a single commodity(whose value fluctuates according to INDUSTRIAL demand roughly 100% up or down over a 3 year period) and hope that the world falls apart at 1/21 odds in your lifetime? And you are doing this because you believe that SLV will be worth more than .22lr, cigarettes, alcohol, or antibiotics, under the collapse of western civilization scenerio, because it's so useful to industrial consumers, such that your concerns regarding financial prosperity and financial security make THIS gamble an excellent opportunity, in the long run, to stave off bankruptcy and maximize profit according to currently dominant property rights paradigms, despite the short term volatility risk exposure?
Would you consider yourself a "cup 20/21 empty" type personality?
I don't know if I should admire your willingness to bet it all(like your entire life), mock your choice of apocalyptic investments, acknowledge that timing the market is impossible(so any one fairly priced investment should be equally valid if you aren't going to spread your bets), or worry about the scenerio where Silver turns out to be the secret ingredient to nuclear fusion power generation and I eat my words when mad max is driving his Mr. Fusion to the battlefield.
I hope you are at-least dollar cost averaging your entry point in that position over the entire 75 year period and plan on having 21 generations of grandchildren to make the expected value of this bet worthwhile!
My recommendation is that you skip next month's silver investment and buy an "introduction to statistics" class at your local community college...
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turned around, causality is
| Since President Richard Nixon took the U.S. off the gold standard in the early 1970's, the U.S. dollar has become increasingly worthless over time
One individual US dollar has become increasingly worthless. "The US Dollar" as a system, is increasingly powerful and useful over that time, and there were and still are many useful and profitable investments which mor
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Roman empire (Imperium Romanum) lasted well into middle ages. It ended with the fall of Constantinople to Ottoman Turks in 1453.
I know Catholics like to rewrite history, but Romans made no such difference. In fact the city of Rome wasn't even capital of the empire after
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The eventual collapse of Western Civilization after fiat currency goes kablooey. Last time that happened was the end of the Roman Empire in the 5th century. Even if that doesn't happen, the value of precious metals will continue to rise. Buy low, sell high.
Perhaps you would best be served to not believe everything you hear on right wing talk radio.
Silver is as risky as investing in gold, despite what you heard Rush, Sean, Glenn or some other right wing talk guy tell you. If you get in at the right time you can make big money, but the problem is that when those markets correct, the destroy your savings. If you bought silver at its high in 2011 right now you'd be roughly down 40% and that is a huge loss.
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Re:Bitcoin (Score:5, Informative)
Sure. But the value of precious metals isn't going to collapse like bitcoins, fiat currency or anything else created out of thin air if investors and speculators stop believing.
Tell that to the gold speculators.
Look at the price of gold over time: http://goldprice.org/gold-pric... [goldprice.org]
If you bought gold on August 19, 2011 for $1850 / oz, you would be pretty sore today at $1262 / oz. The period of September 24, 2012 through to July 2, 2013, where gold dropped by $512 / oz looks like a collapse to me.
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I do see your point regarding precious metals. But I would argue that metals are precious only because we decide they are precious. As an example, the Spanish came to plunder the Incas for their gold; the Incas valued the gold far less than fine cloth (http://en.wikipedia.org/wiki/Inca_society).
And to speculate: what do you think would happen to the price of gold if an asteroid were discovered that was made of the stuff? Part of the value of gold it it's relative scarcity.
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Just another commodity rip off scam. We need a medium of exchange that stands by itself, not subject to speculations of the 'market'.
Bullets and guns. With enough of those, you can get anything you want ...
Fortunately we're moving away from that model in many parts of the world ... just not fast enough.
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We need a medium of exchange that stands by itself, not subject to speculations of the 'market'.
There ain't no such thing.
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A medium of exchange that isn't subject to speculation. Good luck with that.
Why would we even want that? What is wrong with speculation? If people think the price of a commodity will go up in the future, they buy now, driving up the price and encouraging conservation before the future shortage occurs. That seems like a good thing.
Re:Bitcoin (Score:4, Informative)
There are many reasons. For example, speculating with currencies produces no product and no useful service for society, and is in that sense also not work. (Just as sitting on your money and watch it grow is not work.) There is also no guarantee that the dynamic systems created by such speculations are sufficiently stable and non-chaotic to ensure that they won't collapse some day out of the blue and ruin thousands people and companies in the course of it.
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speculating with currencies produces no product and no useful service for society
This is nonsense. If a government proposes a populist, but idiotic, economic policy, currency speculators will assume the value of the currency will fall in the future, and so will drive down the value now, making the consequences of economic folly more immediately apparent, and therefore avoidable. Currency speculation is a good thing. and the speculators and providing a valuable public service. They are mainly criticized by people with a political or financial vested interest in economic folly.
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Speculation, to a point, produces value, as having the prices that best reflect supply and demand is very valuable. We see a lot of that in treasuries: Isn't it incredibly useful to have the best possible guess of what interest rates will look like for the next 10 years? Currency speculation can be just as valuable.
We'd not want an economy that is based on speculation: There's such thing as spending too much on finance. But a world without any currency speculation is a pretty dire one. It's just very hard t
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If I have to store what currency I gain for a while, I want it to keep its value. It shouldn't be a perishable item.
Then you should insist your government have responsible fiscal and monetary policies, rather than shooting the messenger that is telling you that they don't.
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Like the GB Pound under Norman Lamont. Might want to ask George Soros about that.
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No, it is very possible to make to make a medium of exchange so it can't be speculated in. Almost trivial.
The issue is that for something to be money it must be a medium of exchange, a store of value, and a unit of account. It is the store of value that is tricky. Nothing can be a full proof store of value since value is sitting on the shifting sands of time. Value can never be locked in. What may be plentiful and cheap today may be scarce and dear tomorrow. Taste and wants change. Technology and productivi
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I can't see the point you're trying to make. You start by saying that making a medium of exchange that can't be speculated in is almost trivial, then conclude by making a great argument that it's very hard to do.
For the record, I don't think it's possible to create a medium of exchange that can't be speculated in. That would require worldwide agreement of every person living and every person yet to be born.
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For the record, I don't think it's possible to create a medium of exchange that can't be speculated in. That would require worldwide agreement of every person living and every person yet to be born.
I would disagree, but I think we are on the same page.
A "medium of exchange" is a here and now thing, swapping A for B. I don't need a agreement with some born future person because the transaction is occurring now. These types of transactions can be bullet proof.
My point is that money is and medium of exchange is not money. Money is a medium of exchange AND a store of value. This introduces a time dimension and future values. The reason why money has volatility - and thus can be speculated in - is becau
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Ah. I see your point. You're separating the concept of "medium of exchange" from "store of value".
In that case yes, we are on the same page.
You might be interested in a fascinating book "Money: The Unauthorized Biography" by Felix Martin (http://www.amazon.com/Money-Unauthorized-Biography-Felix-Martin-ebook/dp/B00F1W0DAO/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1421348597&sr=1-1&keywords=money%3A+the+unauthorized+biography), which actually goes quite deeply into this concept and traces as far
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Why do we still need a "market"?
What do you suggest as an alternative? Central planning? 19th century imperialism? 20th century militarism? History has shown that markets (consensual buying and selling of goods and services) work better than the alternatives, which are based on force and coercion.
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Speculative markets are not "capitalist" in a strict sense of the term. Price signals in speculative markets are not sufficiently attached to the actual value of a good, which in turn is attached to utility.
Nothing has been lost! (Score:5, Insightful)
Re:Nothing has been lost! (Score:5, Insightful)
Agreed. Also, I don't ever recall return on investment as being one of the selling points of BitCoin in the first place. It was meant as an alternative to currency, not an investment vehicle. Even if the value dropped to parity with the US Dollar or below, it would still retain its initial utility. So again, nothing lost.
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I agree that expecting to use Bitcoin as an investment is a bad idea.
However, you have to at least maintain its value if you ever want it to be able to be used for any serious transactions. Otherwise, no one is going to want them on-hand or you constantly lose buying power. In a way, it requires some sort of market for it, although a less speculative sort of market would be much better.
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Agreed. Also, I don't ever recall return on investment as being one of the selling points of BitCoin in the first place. It was meant as an alternative to currency, not an investment vehicle. Even if the value dropped to parity with the US Dollar or below, it would still retain its initial utility. So again, nothing lost.
Except that for a currency to work somebody has to be sitting on it, no matter how fast you shuffle it around. If everybody's hoarding it because the value keeps rising that's not great for circulation, but some will look to cash in their earnings and keep at least a trickle going. If the value keeps dropping there's no floor, if it drops from $1000 to $1 what makes you think it won't drop to $0.001? I suppose that eventually you'll hit some kind of die-hard fanatics who'll scoop it up against all reason l
Re:Nothing has been lost! (Score:4, Interesting)
The problem is that Bitcoin doesn't really work as a currency when the price is wildly swinging by over 25% in a single day.
Could you imagine being a store that only sold their goods with Bitcoin? They would have to reprice their entire inventory every hour to insure that they are making a profit on what they're selling!
Instead, most businesses that take Bitcoin have to use a service like Bitpay peg the Bitcoin transaction price to something more stable like US dollars. Even then, the Bitcoin exchange services are taking a big risk that the Bitcoin to USD price isn't going to suddenly fall. I'll bet that those services will soon need to increase their fees or offer more favorable exchange rates for themselves to stay in business.
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Calculating value on something you never had and losing said value is the same balloon American financial system has been pumping over and over again.
Right, and no one ever made any money in the American financial system.
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You can only lose your direct investment
You are correct if you only look at the Bitcoin miners. The people who bought Bitcoins then they were anywhere over the current price will lose money if they need to convert them to conventional currency. Also the buying power of Bitcoins will be less as prices in Bitcoins go up as the value of Bitcoins go down.
Re:Nothing has been lost! (Score:5, Insightful)
"Bit Coins are actually more real then the US Dollar."
OK, so where is the bitcoin Navy that is going to protect global trade?
You have got to be kidding... right?
I will buy into the idea of the 'full faith a credit' of bitcoin when it can project itself globally with both ambassadors and military power, until then it is just another attempt to pick my pocket
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Virtually currency value is entire faith based (Score:3)
The strength of a currency has nothing to do with the issuing body's military and diplomatic power. What jellomizer was saying was that while the printing of the US dollar is controlled by a government institution that could print arbitrary amounts of money, bitcoins cannot be arbitrarily created.
But a bitcoin's value is also arbitrary, it is based on the faith of those who hold it. Arbitrary creation is just a talking point. A more stable supply did not constrain the skyrocketing from $60 to $1,000 nor did it prevent the crash from $1,000 to $200. Faith drove both.
Development teams and advocates can make up rationales for their theory of value, i.e. the value is equivalent to the mining expense, but such statement are just salesmanship, marketing, they have no force. Virtually currency value is
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So more than half the worlds currencies don't count either because they don't have substantial military backing?
Many of those currencies are fixed currencies that are pegged to the US dollar, the Euro, etc. A law on the books stating that X local currency equals Y foreign currency. So yeah, the GP has a point.
Re:Nothing has been lost! (Score:5, Insightful)
I've never understood the logic behind statements like this. There are an infinite possible number of cryptocurrencies. A cryptocurrency is nothing but a mathematical algorithm being run on a lot of computers. By its very nature, it can't be in limited supply. Saying that Bitcoin is valuable because it's scare is like saying that digital music or digital video must be valuable because they're scarce.
Any one, at any time, can create his own blockchain and create a Bitcoin clone. After that, all he need to do is persuade other people to adopt his blockchain, and a new standard has been created, with the originator becoming "wealthy". In fact, I suspect that this idea may suddenly occur to the operators of one of the big idled mining centers over the next few months.
And before anyone says, "But Bitcoin was first!", let me reply, "Friendster and MySpace".
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The is an infinite number that can be collected over an infinite amount of years... However at any particular point of time there is only a limited number available to be used. The the number cannot be dramatically increase or decrease with a sign of a pen.
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The is an infinite number that can be collected over an infinite amount of years... However at any particular point of time there is only a limited number available to be used. The the number cannot be dramatically increase or decrease with a sign of a pen.
The number of new coins issued with each block is cut in half every 210,000 blocks (approximately every four years), and summing from 1 to infinity over 1/(2**n) equals one, not infinity. The total circulation will asymptotically approach approximately 21 million.
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Bit Coins are actually more real then the US Dollar. Sure we get a paper or coin note stating that this represents so much. But at least bit coin is connected to something in limited supply thus needs to be shared.
I've never understood the logic behind statements like this. There are an infinite possible number of cryptocurrencies. A cryptocurrency is nothing but a mathematical algorithm being run on a lot of computers. By its very nature, it can't be in limited supply. Saying that Bitcoin is valuable because it's scare is like saying that digital music or digital video must be valuable because they're scarce. Any one, at any time, can create his own blockchain and create a Bitcoin clone. After that, all he need to do is persuade other people to adopt his blockchain, and a new standard has been created, with the originator becoming "wealthy". In fact, I suspect that this idea may suddenly occur to the operators of one of the big idled mining centers over the next few months. And before anyone says, "But Bitcoin was first!", let me reply, "Friendster and MySpace".
A Bitcoin is a unit of account in a specific ledger. The number of units of account in that ledger is finite. Additional ledgers can be created, and have been. But the value of units of account in those ledgers is not equal to the value of the unit of account in the Bitcoin ledger.
It's a little bit like comparing seats at a concert. Yes, we can put more seats in the back, but they are not valued the same as seats in other sections. We can create more seats, but we can't create more seats in the front r
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Currency in general is just common agreement to scale work for goods and services.
Actually, currency is just a way to store value and to use as a medium of exchange. Problems arise when a currency fails to hold its value, causing people to turn to other means of storing value. BitCoin essentially has undergone a very large inflationary period as its value dropped, eroding its usefulness as a currency. Who wants to hold money that is getting less valuable every day? Unless you are speculating you'll want to dump BitCoins for something more stable. However, large stores of BitCoins may be
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Currency in general is just common agreement to scale work for goods and services
This is a key misunderstanding which has helped to pump up these virtual 'currencies'. Modern currencies are not value because of 'scarcity'. People don't want it because it is rare. People want it because they are motivated to pay their debts, either the ones they have chosen to take on or those imposed upon them by a government (e.g. property taxes). As long as one trusts that people will be motivated to pay off their debts in the future and that the money supply will only grow as legitimate promises to p
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Bit Coins are actually more real then the US Dollar.
Really? Try paying your taxes with them.
But at least bit coin is connected to something in limited supply thus needs to be shared.
Limited supply does not equal increased value. There's a limited supply of coffee cups signed by me (currently zero), but if I were to sign one, it wouldn't have more value than (and probably less than) an ordinary coffee cup. Unlike the bitcoin, the coffee cup has utility.
A metric for price (Score:3)
The be-all-end-all of pricing is mining profitability. Bitcoin's difficulty to meant to adjust according to mining activity. If there isn't enough mining going on to produce the mining rewards that should be awarded daily, the difficulty will quarter every two weeks until the rewards are enough to incentivize miners to continue doing so. So, mining operations might have to stop or turn down the heat in order to stay profitable at the current difficulty, and await the approximately bi-weekly adjustment of difficulty before resuming. However, that next adjustment might not be sufficient to restore profitability, so the stoppage or reduction might have to continue through multiple difficulty adjustments.
If mining farm operators didn't plan for this possibility, then they didn't think through the inevitabilities of Bitcoin enough to maintain their business and they are destined to flood the market with their mining hardware, thereby redistributing the mining hardware and decentralizing mining, as it arguably should be.
Re:A metric for price (Score:5, Interesting)
thereby redistributing the mining hardware and decentralizing mining, as it arguably should be.
Large scale decentralized mining isn't going to happen, though, because mining will always be at the edge of profitability, where only the most efficient survive. Those are the large scale operations in areas with cheap electricity.
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Precisely. Those that choose not to constantly be barely profitable will hopefully sell off their equipment to cut their losses, and do so in such a way that those whose costs are lower and thus they are more likely to be profitable will scoop up the equipment.
Re:A metric for price (Score:5, Informative)
> If there isn't enough mining going on to produce the mining rewards that should be awarded daily, the difficulty will quarter every two weeks until the rewards are enough to incentivize miners to continue doing so.
The difficulty only gets changed after the number of blocks since the last adjustment have been met. If less people mine, blocks take longer, blocks take longer, adjustment takes longer. So if people keep dropping out, it'll be a lot more than two weeks for the next adjustment.
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Very good point that I unintentionally omitted :-\
Welcome to the real world (Score:3)
So, Bitcoin wil be subject to volatility, like every other currency and precious metal in history, and that will cause troubles for the people who actually extract the stuff. Who (aside from anyone in the mining business) knew?
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So, Bitcoin wil be subject to volatility, like every other currency and precious metal in history, and that will cause troubles for the people who actually extract the stuff. Who (aside from anyone in the mining business) knew?
The problem with bitcoin is its volatility relative to other currencies. Combine purely speculative/thinly traded exchanges with a lack of an underlying economy of any note, and that's what you get.
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Volatility is a relative term. Some things are more volatile than others. Show me one fiat currency that has lost over 80% of its value in a year and it has not been considered a disaster for the country. Precious metals are much more volatile than currencies as governments work to limit currency volatility. That is one reason that people were not allowed to own a lot of gold when currency was based on gold. The buying and selling of gold would make currencies too volatile for a stable economy.
Charging for transactions (Score:2)
Bitcoin was designed so when all coins are mined, there will be transaction fees to cover the costs.
It was also designed to allow transaction fees at any time.
Maybe that time is now???
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Transaction fees are already in use. The amount can vary based on demand and supply, so no reason why those would kill bitcoin.
Public must have an immediate tangible benefit (Score:2)
Transaction fees are already in use. The amount can vary based on demand and supply, so no reason why those would kill bitcoin.
The attraction of bitcoin as a transaction service is linked to its low fees. If mining must be supported by fees and fees rise to appreciable levels then bitcoin loses its competitive advantage against other services.
The public at large is not part of the "movement", it isn't buying into the politics as a justification to use bitcoin. The public at large is very different from the enthusiasts, the public must have an immediate tangible benefit to use bitcoins.
Currency Hedging (Score:5, Interesting)
Having your expenses denominated in one currency, and your revenue in another, leaves you open to currency fluctuation risk. This is why currency hedging was invented in the first place.
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If you take the "mining" metaphor seriously, alternately you could advise commodity hedging, like what oil companies do to manage the risk of drilling (drilling costs $ but returns bbl of oil). Though there isn't really much practical difference between the two metaphors, I'll admit.
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Hedging isn't free. You're paying somebody else to take the risk of unfavorably fluctuation. It's insurance against unfavorable currency fluctuations.
Raising alarm?? (Score:2)
"raising alarm about its future viability"
To whom?
Price volatility deters public at large ... (Score:2)
"raising alarm about its future viability" To whom?
The public at large. A bitcoin recipient needs to take no risk, they can immediately convert to dollars, euros, etc. This is how many merchants touted by the bitcoin community operate. They do their accounting and pricing in dollars or euros, when offered bitcoins they calculate an amount based on the real-time exchange rate, accept the coins and immediate sell the coins for dollars or euros. Technically a 3rd party, a bitcoin exchange, actually does much of this so the merchant never actually sees or touch
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Hmmm ... (Score:5, Interesting)
So, overpriced speculative currency found to be overpriced?
When BitCoin was worth over $1000, why was it worth over $1000? Because people said it must be, not because it's backed by anything which objectively made it worth that much.
I've always looked at BitCoin and wondered what the value was in it -- sure, people said "Yarg, no regulations, no governments". But did you really think that would last? Or that without those people would be honest?
Basically BitCoin created a bubble, inside of a reality distortion field, and people assumed it would go up forever and always stay that way. And it's been all hype since then. But it seems like we've been discovering that the players are either shady or incompetent, and that it doesn't look like all of the voodoo magic ascribed to it.
BitCoin seems like it's always been an idea, but somewhat divorced from reality. Essentially, it placed value on ... what ... large prime numbers?
As someone who has always been skeptical of BitCoin, I don't find myself seeing any reason to think it was ever anything but something people wanted to believe in, but which was never going to pan out as claimed.
This is like the people who were still buying tech stocks at the end of the .com bubble. It's musical chairs, but with money. Only now people are starting to realize there's not a lot of seats left.
Re:Hmmm ... (Score:4, Informative)
Bitcoins have not lost any of their utility, at all. If I want to buy something that costs $200 in bitcoins, I go get $200 in bitcoins and then buy it. It doesn't matter how many bitcoins I get for $200, the system is still working exactly like it always has. If someone decides that they want to buy $1000 in bitcoins, spend a fifth of it, and save the rest for another purchase later, they might find out that they don't have enough for another purchase whenever they get around to it. The volatility of bitcoins is just proof that you shouldn't horde them, there's no reason to do that. But the system in general has lost exactly zero amount of usefulness.
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The volatility of bitcoins is just proof that you shouldn't horde them, there's no reason to do that.
So BitCoins are not suitable as an investment? Interesting....
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The volatility of bitcoins is just proof that you shouldn't horde them, there's no reason to do that.
And yet people go out of their way to mine them. That's why I find bitcoins so distasteful. If they were nothing more than an algorithm for cryptographically-encrypted checking accounts, denominated in the same currency I'd always been using, I'd be all for it.
Instead, it not only creates its own currency, but proceeds to hand it out for (effectively) free to early adopters, and others for the value of devoting computers and electricity to it. The fans generally have a personal interest in it, not just to i
Still too volatile. (Score:2)
Even if you buy bitcoins, unload them ASAP to buy something, and then the receiver unloads them ASAP to get them back into something a tad more stable, it's STILL too volatile to rely on. A retailer could lose a significant chunk of his/her margin in the lag time before the coins can be transferred again.
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Re:Hmmm ... (Score:4, Insightful)
Why is 1oz of gold worth $1262? Because people said it must be, not because it's backed by anything which made it worth that much.
This is how pricing works. There is no item or unit or work in the universe that has some kind of intrinsic price. Items are worth what the market will pay for them, period.
Pyramid Schemes (Score:2)
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You jest, but in its current incarnation, that pretty much describes the international stock market.
Unrealistic expectations and assumptions, divorced from reality, subject to the whims of speculation and manipulation, and operated in such a way as to allow the big players to skim off the top.
The crash of 2008? That was what happened when the guys running the Ponzi scheme managed to get everyone else to cover their losses.
The modern financial system is little better than any other pyramid scheme. It's jus
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The crash of 2008? That was what happened when the guys running the Ponzi scheme managed to get everyone else to cover their losses.
Damn. Here I was thinking that the GFC was primarily precipitated by homeowners starting to default on subprime mortgages as the US economy started to slow and people were being laid off. The most junior people at first, sure... exactly the sort of person a subprime was aimed at (a regular consumer with a good credit history, a job and a deposit didn't need a subprime). As subprime mortgages started to default, first in a trickle then in a flood, the investment packages (the CDO's) started to turn sour.
This was to be expected? (Score:4, Interesting)
I am not sure about the rest of you, but I expected this and IMHO Bitcoin will be subject to high volatility for a long time to come.
Also is it not possibly that there are entities out there purposely trying to undermine it? Such as governments who can no longer control the money supply (and their favorite hidden form of taxation, inflation!). Destroy the confidence people place on Bitcoin, if enough lose faith it will start a negative feedback loop and we can watch it spiral down to it's death.
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I too find it amazing that people find this surprising. Given the rapid upward trajectory the bitcoin has had, a downward correction is not the least bit surprising. It may have great traits as a currency, but stability is not one of the traits bitcoin has been able to demonstrate. I also don't understand why inherent volatility should necessarily preclude its use. People still play the stock market, and volatility does not necessarily destroy the market.
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Does it matter if someone is trying to undermine it?
If a government has the power to undermine Bitcoin at any time, then why would I use Bitcoin? Because I'm a masochist?
I want a system that cannot be undermined easily, not one were we whine about it being great, just so as long as no one actually attempts to undermine it.
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What's wrong with inflation? If anything, it's a flat-tax that certain segments keep talking about. Use it or lose it.
Just wait (Score:2)
Of course this happened. And when they stop being gifted bitcoin in return for mining, it will happen even more.
golden rule (Score:2)
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It can also be a loss if you buy it, wait for it to go back up again, and then it folds entirely, leaving you zero.
Bitcoin may have a bump up in the future, or it may descend to irrelevance. I'd say that the chance of complete oblivion for Bitcoin is not an insignificant probability.
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I thought Bitcoin was a currency that could be used day to day to purchase things. If the value is too volatile Bitcoin's use as a currency is diminished.
Won't someone PLEASE, THINK OF THE CHILDREN?!? (Score:2)
Won't someone PLEASE, THINK OF THE CHILDREN?!?
Oh wait. I can spell. Miner != minor. There are no minors under pressure here.
Never mind.
Back to your regularly scheduled Bitcoin rants to benefit the Winklevi...
And this is why Bitcoins are still a joke (Score:2)
A national currency that routinely swung by this amount would be a national crisis. (For example, something similar happened to the Swiss yesterday (they abandoned a policy to keep the Franc weak), and it's making headlines all over the world. And it's just a one-time event.) The economy would be in shambles as all trade came to a screeching halt, due to the complete and total inability to properly price contracts. Even used solely as a money-transfer system (instead of a real currency) it still swings
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Would things like cryptowall be feasible without it?
Of course they would. There's more than one way to pay ransomware authors.
For example, they can buy a large amount of a penny stock, then demand that their victims buy that stock x - done quickly enough, often enough, stock gets pumped. they dump.
They can start their own "anti-virus" company, and offer a service to unlock the hard drives cheap. Works better if they're also (through emails) asking for much more money, so it appears there are two actors - the crook and the anti-virus guys, instead of them
Re:The correction (Score:2)
Every fiat currency in the world is backed by the guns and ammo the country can bring to bear in the event of war, because might implies stability.
Fiat currencies are backed by nothing more tangable that that which underlies bitcoin. It's all a matter of confidence. The biggest problem with bitcoin is psychological. Humans, on the whole, have been duped into believing that inflation is good, and that more money means more value (ignore the fallacy there, most people will never understand it). Bitcoin is a