Bitcoin dropping after BTC China said it is closing
cnbc.com
cnbc.com
There are about 11 million millionaires in America. There are only ever going to be 21 million bitcoins total. That means, even just among American millionaires, they will never be able to all own two bitcoins. How many will try to put %5-%10 of their net worth into bitcoin when they become convinced of its reliability?
Bitcoin has been under various forms of attack, by state level actors and by hackers for the past 8 years and it has done quite well. I am unaware of any software project that has captured this much value with this little vulnerability.
The value of all the gold in the world is about $8T. Bitcoin as a store of value has a lot of advantages over gold:
- Its terminal supply is absolutely fixed, unlike gold, and its rate of inflation is rapidly decreasing to below golds.
- It's easy to store wealth in without being obvious to others.
- It is easier to transport bitcoin than any significant amount of wealth
- It is easier to protect bitcoin than gold. Gold has to be guarded, Bitcoin can be split in to an n-of-m key and encrypted and replicated, securing it from fire, theft, etc.
So given all that, what is the ultimate intrinsic value of bitcoin? Lets say it is half that of gold. Then what's the intrinsic value of a single bitcoin?
That's something we can calculate: $4T / 21,000,000 = $190,476
Bitcoin is better than gold at gold's primary purpose. Yet its current value is much less than that of gold. This makes sense given that bitcoin has not yet crossed the chasm-- but gold is also something very rare for people to hold. People have a negative net worth and not a lot of them hold gold.
Bitcoin is the very definition of a disruptive technology that will revolutionize society for the better and hackers are embracing it. You should too.
What I can't find is the percentage of all above ground gold that is held in vaults & Jewelry vs captured in industrial uses.
That would be a better figure-- because it takes into account the centuries of accumulated financial gold (whereas jewelry and industrial gold is more likely to be recycled over time.)
Also, I would consider jewelry gold to be financial gold as well, because it is really almost the only store of wealth available to people at the lower socioeconomic levels.
but you have to realize, part of that 40% in investments makes sense because there is a fundamental non financial use case - jewelry. Someone will always buy gold at some price to make jewelry. So, that also drives investments. So bitcoin can't claim all of that 40%
As a modern eTulip bubble, it's a "success" for anyone who has made money speculating.
As a replacement for fiat money, it's an absolute disaster as a currency. Volatility and high transaction fees have killed any opportunity Bitcoin may have had to gain traction as a way to pay for anything besides drugs, ransomware, and evading currency controls.
Any talk about it being a replacement for fiat money is evading my point. I made the point that it was a plausible good store of value, not currency.
Oh, and by the way, there's nothing wrong with using bitcoin to pay for drugs, and this argument is akin to saying that the US Dollar is evil because it is so widely used in the drug trade that every $20 bill tests positive for cocaine (so I've heard.)
As for evading currency controls, aka economic oppression- that's one of the great uses of Bitcoin that will help improve people's lives world wide.
Finally regarding tulips, you can't have it both ways- you can't say price going up is proof it's a mania and price going down is proof it's a mania. Tulips were not a revolutionary new technology.
Anyone holding that much BTC, and facilitating that type of transaction will likely be subject to some form of regulatory scrutiny, sooner or later.
Yup, that's it, I'm investing!
>> Bitcoin is the very definition of a disruptive technology that will revolutionize society for the better and hackers are embracing it.
No, it's pretty much the definition of an e-tulip, and today has shown that it can and will be hugely affected by the actions of governments.
You do not seem to realize that BTC was "crashed" from $1,200 to around $800 back in January of this year. Was that also proof of whatever it is you're trying to claim?
You think that when the price goes up it is proof that bitcoin is a bubble and a mania... and that when price goes down it proves it's a bubble and a mania.
Also, the massive down voting that my post has gotten- despite it being a substantive contribution to the discussion-- with the uprooting your post has gotten, despite it being nothing but characterizations-- is actually very bullish for bitcoin. So long as even the "hackers" here don't get it, then that's proof it hasn't crossed the chasm and isn't in a bubble. (And your opposition is really all about the fact that bitcoin disproves several sacred economic theories.)
I'm frequently appalled at how "hackers" and "technologists" here and in my professional life have little factual indea of how Blockchain works, let alone something like Solidity or EVM.
I am utterly convinced that this is the future "App Store" that we are building on and the fact that so many programmers are oblivious is a sign for me to Keep Loading up on BTC, ETH...
It literally is Programmable Value and Transfer. It's absolutely slick.
People have such cognitive dissonance since everyone has been pretty much lied to their whole lives on the nature of Money and Credit. This kind of social and technical phenomenon requires people to reject a previous understanding they had (which in turn is offensive because that understanding goes to the core of their being -- earning your first allowance as a kid, hard work for your first paycheck, etc).
It's defensive for past Ego Investment. It's abhorrent that one could have bought $100 worth of something just a few years ago and would be a millionaire today.
And if it steadily goes up, "Deflationary Currencies Can't Work".
And if it stays steady, "The market cap is too low to take on the world's transactions while remaining stable."
Well it's true, the price of BTC rising steadily is not something which refutes that argument, particularly as BTC doesn't seemed to be used much as a currency.
Why would anyone want to use Bitcoin versus any of the newer, faster, more feature advanced alternative crypto coins like Monereo, Litecoin, Ethereum?
The two main forces that give Bitcoin more faith power than others are its age and how well known it is. The attack surface is small because of its simplicity.
I doubt the smart contract systems will be valuable until they build up a body of vetted (by time) law like Deleware has for startups.
This only applies to Bitcoin, and as anyone can see even big operations like Coinbase trade in at least three difference crypto currencies.
>> - It's easy to store wealth in without being obvious to others.
Can you elaborate on exactly what benefits you propose this offers? And don't say tax evasion.
>> - It is easier to transport bitcoin than any significant amount of wealth
We've been able to send money all over the world for decades now, I can literally send my friend in New Zealand $50 using an app on my phone. Not sure how Bitcoin makes this any easier. Maybe it makes it a bit cheaper, assuming it's value doesn't plummet while your transfer is going through?
>> - It is easier to protect bitcoin than gold. Gold has to be guarded, Bitcoin can be split in to an n-of-m key and encrypted and replicated, securing it from fire, theft, etc.
This is a hard sell. Your choices for storing Bitcoin are basically keeping it in some sort of online wallet through an exchange or an application running somewhere, or you can store it offline ie a paper wallet. I don't see how this is any easier to secure than putting a pile of gold in a vault.
Bitcoin is probably even less secure for the average person - all it takes to hijack a wallet is a simple key logger. Once your wallet is gone it's not like you can contact your bank to get it back or have transactions reversed like you would with a normal account. Not to mention all the millions of USD worth of Bitcoin that have literally just been lost forever by people forgetting a password, tossing out old PC's etc.
It's not about sending $50, it's about sending $5,000,000.00. Which is an entirely different class of problem (paperwork, fees, process). Making that cheaper, faster, easier.
That's a 28% drop from the high. For normal securities a price drop like that in less than a month would be considered a crash.
Does it count for BTC as well or are the elevated levels at the start of the month with too thin a volume to be considered legit?
Also do not forget the people that had money in BTCC exchange. I suppose many of them sold their BTC in order to withdraw there money hence the crash that you see. This price drop in BTCC exchange created arbitrage opportunities and so people (and probably auto-trade bots) started buying cheap BTC in BTCC exchange and then sold to another exchange - resulting in the drop of price that we see right now. Of course panic selling is happening right now too...
Don't forget that 20% changes are not something extreme. Check TSLA price between 23th of June and 6th of July this year. The price went from $383 to $313 which is around 20% change.
That is not exactly a great comparison. A normal blue chip won't fluctuate more than ten percent in a month, let alone in a day.
But currencies are supposed to be more stable than stocks. EUR to USD over the past month has wildly swung from 1.17 EUR->USD to 1.19 EUR->USD.
Of course the large move there was caused by politics but the same holds for this BTC drop.
I wish them the best, and I truly hope they succeed, but it doesn't change the fact that the speculative value is super high compared to their asset value.
That explains why it can swing wildly in price while Ford generally won't.
"Tesla Sinks 20% From High — Entering Bear Market Territory — As Concerns About 'Bubble Stock' Mount"
https://www.cnbc.com/2017/07/06/tesla-shares-plunge-12-perce...
Even stocks can rise 7% a day. Just some extra bad luck with stock exchanges in china and reaching 5k $
We will see how far it goes this time and when the big traders come back marching in ;)
Biggest gain and loss only for today has been 17 and 18 percent respectively. While one can argue on a stable stock vs BTC but that is not a fair comparison.
The faster percentage growth periods did not see $600+ swing days.
The reason is, it's not so much a currency as a store of value that is simultaneously benefiting from global bad monetary policy and the cycles of technology adoption.
I don't even think Bitcoin has crossed the chasm.
It's a new asset class.
CNBC will call it a crash. The network continues to function as well as it did in 2011 when it traded for $1.
Looking at articles like (https://www.buybitcoinworldwide.com/mining/china/) ~70% of all mining power is handled by China based groups, so it'd be a big change for that to be removed...
https://www.pcworld.com/article/3199257/components-graphics/...
It could be good for gamers if BTC crashes and ETH and the others crash alongside it, making mining unprofitable.
FYI in the last couple of months price pressure seems to have switched to the nVidia GTX 1070 cards as the Radeons have been overinflated or just unavailable, and the 1070 has a good price/performance ratio for mining too...
What the government probably doesn't like is the other way around, when normal people buy BTC with yuan and then sell them abroad, exporting capitals.
Don't they also get some type of currency back when they do this? which is probably then spent inside China too? I don't see how this would be different from the first scenario. Maybe I'm missing something.
The issue is with the exchanges not being fully regulated according to the desires of the PBOC. This was the problem earlier in the year. They are tightening the screws.
But you can sell BTC to people you know face to face and it's legal.
Bitcoin almost defines volatility.
The price of bitcoin can literally fall to zero. With fiat currency, achieving that would require the government losing its power to enforce tax collection.
People losing interest in a fad seems to be a bigger risk than a governmental collapse.
There's a use for BTC, it's just illegal.
A simple example would be if I want to pay someone a large amount of money (>$10,000) privately. Using credit or a check creates a financial record. Cash is the only way to keep the transaction completely private. With such a large sum, it can become non-trivial to transport that much cash, especially internationally. There's also the obvious issue of securely transporting that much physical currency. With cryptocurrency, I can transport arbitrary units of value over the internet with the security of cryptography.
You may argue that there's no legitimate transaction that would occur at that high of a dollar amount, but I think that's a matter of opinion, and that individuals should be able to transact one to one without involving any third parties to transfer value.
> And how are you able to avoid taxes with bitcoin in a way that is legal?
This is a bit of a gray area. At the most illicit end, it's a total tax dodge by laundering/concealing income. At the legal end, I understand that there are cases where the taxes you're supposed to pay on bitcoin gains works out better than if you had made that gain through a stock or other type of investment. I haven't converted large amounts of cryptocurrency to USD or vice versa, so I'm not totally familiar with the IRS reporting for crypto assets.
http://www.townandcountrymag.com/society/money-and-power/a10...
That's one of rich private pre-schools in NYC. Last I checked, educating 6 year olds isn't illegal.
"It’s just really another payment option, Ciocca says. "If you don’t want to use it then by all means pay with a check—no harm, no foul."
But all modern taxes (really, even, over time, property taxes) are driven by the underlying value, not by a fixed amount, and thus create no actual demand for the currency. If the government requires that I pay 10% of my income, and my income is 10 cows, it does not matter what the price of cows in dollars is -- I owe the dollar equivalent of a cow. If dollars are expensive, then I trade one cow for a few dollars and pay that, if dollars are cheap, I trade one cow for a lot of dollars and pay that.
There is no net demand created by this, and I don't know why people keep claiming that.
The other side, the "actual use", is definitely a real thing -- price discovery is very difficult when there is no real commerce, and until a complete supply chain can be priced in the currency, it's going to be hard for there to be any stabilizing pressure.
Selling land, for USD, and USD only, is certainly one way that it made USD valuable.
Property taxes are very much the same kind of thing, as you mention. In effect, it makes landowners into tenants to the extent that the land is taxed.
The government, being defined as the entity with sovereignty over a given region and a monopoly on force in that region, it is in effect a landlord at root. And it can make people pay to live in the area it controls. It currently strays from this role by taxing other things as well, and in so doing is generally destructive to output.
But taxes on land and natural resources have no deadweight loss and historically have been the major source of government revenue.
So, in effect, fiat currency is land-backed. And land value comes from the value of the location, the desirability of living there, and the productive capacity of the region... which are in turn affected by government policy.
But in modern times, ~90% of government revenue [1] is from taxes that are relative to income, and thus create no net demand for USD. I don't know when this became the case (at least the 60s), but I suspect for a very long time. The federal government, as far as I'm aware, has no property taxes; those are at the local or municipal level. And there, they are based on the assessed value of the property, so if dollars are expensive, then the taxes are lower, and if dollars are cheap, then the taxes are higher. Because the liquidity is required, you could argue that there's some marginal effect, but given that equity is easily converted to debt at scale, I'm dubious that that would ever be a factor.
In my opinion, fiat money is the closest that we've been able to come to "good" money in a sense -- easily transactable, scarce, fungible, hard to counterfeit, easy to validate. The value derives from these characteristics. The "scarce" aspect is the one that bothers me the most, because it doesn't have the same guarantees about scarcity as something like gold (although it excels at the other points). The notion that money is "backed" by anything is and always has been a red herring in my mind; in almost every case, disconnects between the thing that explicitly "backed" a currency and the currency itself have had little to no medium-term effect on the value of the currency, because the currency typically "inherits" the scarcity aspects of its backing. To what extent cryptocurrencies can succeed is still up in the air, but I remain very optimistic.
No amount of institutional complexity can negate this fact. Land is necessary for all production and for all life. Control of land enables the owner to demand a rent, and to demand it in whatever form the landowner wishes.
That form could be as terrible or as optimal as conceivable, but that choice is ultimately up to the sovereign. None of your traits for optimal money matter by comparison. Those factors will surely enter into the consideration of any wise sovereign currency issuer, but only if they are wise.
The currency that is demanded could be a cryptocurrency, although a sovereign currency issuer would be foolish to ever choose that, and would put them at a strategic disadvantage during war.
But this is irrelevant. Taxes have nothing to do with a currencies value. The tax rates in the US vs the EU do not affect the Dollar to Euro exchange rate.
This argument seems to be more a product of some sort of ideological fetish for taxation than an economic perspective.
https://www.bloomberg.com/news/articles/2017-09-14/bitcoin-t...
Price goes up? To the moon!
A government accepts bitcoins? It's the future!
A government doesn't accept bitcoins? They're scared, it means we're winning!
Price goes up? e-tulip, don't you see?
A government accepts bitcoins? Fools!
A government doesn't accept bitcoins? Of course! Why should they?
Just a counterpoint, the truth is probably in the middle.
Why is it discounted? Did their PE drop or what? I mean, why????
Most people who claim BTC is discounted now at $3500 probably also believe that BTC is a long-term good "investment", which would imply that they also think it's "discounted" at $5000.
I guess this is obvious to all, but there are no well-understood "fundamentals" yet for BTC.
The most charitable thing you can say is that buying at $3500 now is a better deal than buying at $3500 previously, given it's now been revealed that someone was willing to pay $5000 at one point.
Basically, China wants artificially high savings rates and for people to keep their cash in state-connected banks, which keeps the supply of money for investment high, because this is baked into their growth model. Bitcoin undermines that.
https://www.bloomberg.com/news/articles/2017-08-28/wanda-bon...
http://www.scmp.com/business/china-business/article/2110610/...
With a GPU mineable currency, if it crashes and becomes "unprofitable" to mine, people with GPUs can just use them for something else and the currency can die entirely.
So 50% attacks are still difficult because unless bitcoin becomes almost entirely worthless (at which point a 50% attack is kind of pointless), there is still just as much hashing power sitting around waiting to be turned on when it becomes profitable. Power that can't really be repurposed, so it's not really going anywhere.
EDIT: bitfinex doesn't work on the machine I'm using. Guess shorting will have to wait for later.
Another way of shorting is to get an ETH loan from someone, covert it to $ and then wait for ETH to fall. When it does you can buy more ETH, pay back the loan and keep the profit.
P.S.: GDAX is owned by Coinbase
Anyone who thinks they can figure out buy/sell signals for cryptos right now is a lunatic.
2. Shut the fuck up about "signals" and "trading"
3. Build cool apps around the crypto ecosystem
4. See more and more people using cryptocurrencies
5. profit
Example 2: I can utilize the blockchain to proof authenticity of a document, image, sound, will, legal document etc.
Example 3: Filecoin, Siacoin, Storj - P2P file hosting
Example 4: Aragon - Decentralized trust-less companies - Test their alpha version - it seems the solution on the governance of open source apps
Example 5: Decentralized exchanges - check etherdelta.
The above are just really basic examples - we are still in a really premature phase. The whole point of cryptocurrencies is that I can trust and exchange labor, money or whatever with anyone worldwide without me even knowing them.
The worldwide economic crashes were the result of people trusting 3rd parties such as banks, investment firms etc. This problem can be solved.
Even better, use the dollar cost average approach to buy and don't sell unless you are using it as a currency. The world needs a digital currency now but the volatility is preventing that from happening.
EDIT: The pair in the image is ETH/EUR
A normal stock has the underlying company, earnings, performance, forecasts, etc. to sort through and figure out where it is headed, but ETH and BTC have no such thing. So what better way to analyze than TA?
"Don't try to catch a falling knife..."
Are you conveniently forgetting the first few weeks of this year? They changed their policies towards cryptocurrencies in a way that wasn't quite clear (rumors were that "China is banning cryptocurrencies!" and "Chinese exchanges are closing!"). The reality of the regulatory change was tiny in comparison to the rumors, and many people profited from the short term rumor noise.
Its really hard to call a bottom. Even if you think the security will recovery, buying in at $2000 is cheaper than buying in at $3000.
Local bitcoins is already out there and if those get blocked by the great firewall of China, alternatives will pop up soon enough.
Also the ICO environment is littered with complete utter garbage and I can see lots of people getting burned when jumping in uninformed, which seems to be happening on an accelerated pace these days.
Why do you think they have to do it in a "whack a mole" type of way?
It's not terribly difficult for one government to establish "best practices" and then ban all cryptocurrencies and/or ICOs that don't strictly adhere to it.
Also what happens when a big holder of BTC decides to cash out? Wouldn't it become similar to a typical bank run, collapsing the exchanges (and thus the market)?
The "market cap" is then just a number calculated by taking this average and multiplying it with all Bitcoins in existence. Of course, the value would collapse instantly, if just a fraction of these is put up for sale for current market price. Actually you can witness this happening right now (try www.cryptowat.ch and just pick a Bitcoin exchange and watch how the price moves...mostly downward right now...because there's so much selling going on).
In case of Bitcoin it is even more severe, as it is rather well-known that only a fraction of the 16.5 million coins in existence is even accessible and an even smaller fraction of that is actually circulating. There are multiple millions of coins buried on wallets to which the private keys have been long forgotten. Or at least "most likely", because there's no way to prove whether a particular wallet is just inactive, but someone still has the key, or whether the knowledge about the key has been lost forever, and with it any access to the coins on it. I heard about estimates of only 8 million coins being actually accessible and in some kind of regular or irregular circulation...
Yes and no.
User behavior drives the market price, certainly. But "bank runs" are only bad because of fractional reserve.
When the bank essentially loans out 80-95% of their assets in order to create more loans/credit (thereby creating $4-19 in new credit for every $1 in reserves), the run can empty reserves and there is pressure for the bank to call in loan repayments early.
BitCoin exchanges (in their core exchange role) don't create credit. They simply convert one currency into another. If an exchange also lends (so users can buy cryptocurrency "on margin"), it is acting in another role, one which is susceptible to "a run no the bank".
Perhaps the party in China has decided enough is enough, and that they must regain control over capital flows which can potentially leave the country - just like they have with foreign property investments.
It's no secret that BTC fans tend to take offense at even small insignificant stories criticizing BTC. They will flock to CNBC, register accounts to show who is the boss. So what do networks do? Fan the flame and write even more stories de-riding BTC. Because any publicity is good publicity. The BTC fan reaction at that point is a forgone conclusion.
As I write this reply. The bitcoin article is at the top. There are at least 15 more articles more recent than the bitcoin one from 3 hours ago.
Just interesting
If an outlet shows a consistent pattern disparaging something.
>If you put yourself in media's shoes, their whole agenda is - news and advertisements.
Most big media outlets are part of larger corporate conglomerates. So it is in their interest to push a narrative that is helpful to the larger investment portfolio.
The typical response was 'If X bans the cryptocurrency, we will just trade in another country. That's the whole point!'.
Can somebody explain what will happen if U.S starts to feel the pressure from Bitcoin and kills it at the point of exchange? Sure, you will still have your Bitcoins, but they will drop in value and become useless.
Furthermore, what will happen to the market if 1%'s attempt to convert a couple of billions to USD at the same time? Who will honor that transaction? The banks will not touch it.
This will end up just like the banking crisis sans a bailout. People can't get the 'money' out because the exchange rate is not going to be honored, and the value of their money will drop over night.
This legitimizes Bitcoin and allows the US government to benefit from its ongoing use, just as with other assets.
Can you explain how they would? To me this sounds like saying the US would ban World of Warcraft cash.
But we can just clone the currency, let's create bitcoin cash! Or let's agree to change the algorithm!
Hold on, I thought crypto-currencies were meant to be immune from government interference.
Wait, China cracking down on bitcoin makes its value plunge!
There is only one way to learn discipline when investing, the hard way, loosing one's own money. Hopefully people haven't bet too much on this.
And they are... mostly, but remembers that a lot of people invest in cryptocurrencies without knowing what they're about. People's perception is what drives the market.
Coin supply limited to 21 million -- still in force. Easy global transactions online that you can do with your phone-- still working Censorship resistance-- still there Trustlessness -- still trustworthy
What exactly do you think is the thesis that has crumbled?
>> I thought crypto-currencies were using encryption to ensure that no one can create more currencies like a fiat currency.
Well, you can't just create more BTC, but if you fork it, sure, you can create a parallel currency called BCC where everyone who has BTC gets BCC too. The challenge is persuading people that BCC has value. Which apparently happened.
And you can conjure up whatever altcoin or ICO token you like. But again you have to make people think it has value. Such things are not interchangeable with BTC.
>> I thought crypto-currencies were meant to be immune from government interference.
Bitcoin is immune to government interference. The government haven't been able to mess around with the supply, or take anyone's bitcoin away or prevent people sending each other bitcoin. What they've done is tank the value by stopping exchange with other currencies. Arguably this isn;t much to do with bitcoin.
Of course if you're only interested in bitcoin because of 'investment' which you hope to turn into dollar or yuan gains, then that's something different...
>> Hopefully people haven't bet too much on this.
Well, there are quite a few dollar multimillionaires who have got there via cashing in BTC, so somebody has been paying in to the system!¬
Until the debate of changing the algorithm is opened again. Following the algorithm is only a convention. Conventions can change.
Yes, you can fork open source software, but as you see the value doesn't come from the code intrinsically. BCH is at $500, even after pumping and a year long campaign of misinformation. Other alts have to provide compelling value to get a good market price.
Nobody ever said cryptocurrencies were immune from government interference. They are immune from government corruption. You haven't shown anything to the contrary.
IT's funny how, whenever BTC slips a little you guys declare victory, but you're kinda ignoring we're up 10X in 18 months.... where are your declarations of defeat? (if that's your standard- price movement.)
How many years of knocking down the same straw men is it going to take?
Yup, a sure sign that something is screwy - let's fork the currency and award ourselves 10-20% extra money overnight!