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Comment by simias | Hacker News Reader

Since the article states "the trigger for the latest sell-off is unclear" I'm really curious if somebody here could venture a guess about the reasons for the sudden drop. The Bitcoin Cash fork seems suspiciously correlated but is it big enough news to cause such a turmoil?

Being a cryptocurrency-skeptic I won't pretend that I don't experience a little bit of schadenfreude when I see CC crash, however if I'm trying to be a bit more constructive I suppose that means that we're nearing the "make or break" point: if the huge investment in cryptocurrency-related technologies over the past four years or so manages to produce something actually useful over the next year I have no doubt that this is only a temporary set-back and we'll see BTC (or some other coin) breach $20k again.

On the other hand if, like I believe, it's mostly scams, empty promises and poor understanding of technology and/or economy, then this might be the beginning of the end. Hype can only sustain a $100 billion market cap for so long. That being said I wouldn't be the first Pythia to erroneously predict the downfall of cryptocurrencies...

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Trading volume has dropped significantly over the last 6 months. Large holders have been patient waiting for new money to enter the market. Eventually, when the only activity is a few automated traders and the exchange liquidity provider, large holders are faced with opportunity costs of investing in something else and the limited liquidity the market can absorb as they exit. It's a domino effect as they see each other wiping the liquidity off the books as they market sell. No one wants to be the last one holding the bag.

This is also the result of the federal governments of the world, the US in particular, choking off all the fiat<->crypto exchanges with their expanded and draconian know your customer laws.

As an anecdote, I didn't buy my monthly bitcoin purchase early this month because I've been (and still am) locked out of my ~5 year old coinbase account I use constantly because they are being required to require new forms of ID and I cannot supply it.

Even if the stupid speculation markets and their off chain antics didn't exist this would be a problem.

Yeah, KYC/AML is totally bad because of trying to actually prevent money being funnelled into crime organization etc.

This is why I cant stand ignorant crypto-fans.

Even according to the IRS's own estimates, laws like Fatca would never pass a cost/benefit test. The implementation costs of such bureaucratic monstrosities is in the range of hundreds of billions, whereas the benefit is a few orders of magnitude lower. The established banks do not complain much about it because the high fixed cost of compliance disproportionally affects small firms, thereby protecting them from being disrupted by innovative startups.

So I know next to nothing about these regulations but what do you mean by "cost/benefit" exactly? Surely if these rules are meant to fight (directly or indirectly) organized crime then you can't just judge them on the amount of money saved? If you spend $10 millions to prevent $1 million to reach a terrorist organization, can't you consider it money well spent?

FATCA is about making non-US financial institutions report to the IRS et al about holdings of US citizens abroad. Worrying about terrorist cells in foreign countries made up of U.S. citizens is absurd.

FATCA is the stick used to dissuade tax evasion by US citizens. If people think they can evade taxes successfully, they will. Whether this impacts Bitcoin or other crypto is inconsequential.

if the terrorist organization is able to fund itself, then no, 10 to 1 is not money well spent. You'll lose in the long run.

Exactly. If we want to do a true benefit calculation, we have to look at alternate futures.

One important future to avert is where organized crime is rampant. Even if we look at only the economic costs, one study in Italy suggests mafia domination cost 16% of per-capita GDP. Given the US's $20 trillion GDP, that's quite a lot. And that's ignoring people's preference for security and safety. As an entrepreneur, for example, I think it's great that I don't have to worry about paying for "protection" to keep from having my business burned down or my legs broken.

We also have to look at terrorism. KYC/AML work to keep cash out of the hands of terrorists. Terrorism is, moral and human cost aside, very expensive. The 9/11 incident alone sees estimates in the $2-3 trillion range for total economic costs.

So even if KYC/AML really does cost hundreds of billions, which I doubt, it's a bargain compared to the problems it's meant to prevent.

[1] https://onlinelibrary.wiley.com/doi/abs/10.1111/ecoj.12235

[2] E.g., see https://www.brookings.edu/articles/the-world-after-911-part-... and https://archive.nytimes.com/www.nytimes.com/interactive/2011...

> One important future to avert is where organized crime is rampant... one study in Italy suggests mafia domination cost 16% of per-capita GDP. Given the US's $20 trillion GDP, that's quite a lot.

You’re making two separate, tenuous extrapolations here. Can you justify them?

I probably can. Did you want to ask some specific question? Better, do you you have a way of calculating path-not-taken costs for rampant organized crime that you think might be more effective?

I didn't see any calculation in the parent comment.

Are you asking me to do some sort of calculation? If so, could you spell out what and why?

The point of my original comment was to point out a couple of things we'd have to include in a cost/benefit analysis of KYC/AML regulation, not to actually do a proper analysis, which I would expect to run to hundreds of carefully researched pages.

Maybe I misread your comment. What did you mean by "Given the US's $20 trillion GDP, that's quite a lot"? What is "that" in this sentence referring to?

That "that" refers to the implied product of 16% times $20 trillion. It's meant to provide an order-of-magnitude notion of what rampant organized crime could cost an economy, so that people who had previously read "costs of such bureaucratic monstrosities is in the range of hundreds of billions, whereas the benefit is a few orders of magnitude lower" could more usefully think about what the benefits of crime reduction really are.

Exactly. You have provided no reason at all to think that repealing KYC laws (which were introduced by the Patriot Act in the 2000s) would transform the US into Italy, which is frankly just silly.

It also flatly contradicts the fact that the US didn’t lose 16% of its GDP to mafia activity before KYC laws were introduced.

Let's try this again: What makes you believe that repealing KYC laws (which were introduced by the Patriot Act in the 2000s) would lead to the same conditions as Italy? And how is this consistent with the fact that the US didn’t lose 16% of its GDP to mafia activity before such laws were introduced?

My American relative that was born in the USA and lived there for about 6 weeks finally did their US tax returns a few years ago.

No tax owing and received some hundreds of dollars in refunds from the IRS.

They even corrected a mistake resulting in an even larger refund (forgot to apply for some program).

All because of increasingly draconious laws for non-filers that conveniently ignore that most Americans abroad aren’t millionaires.

Cost: hundreds of US$, data entry and processing.

Benefit to US: ?????

He meant cost bebefit to organizations to implement it. Take HSBC for example, one of largest China/HK bank. They waited until Fatca kicks in, then realized it will be too complicated and expensive to implement, so what do they do? Within 45 days they kick out all us-citizen based accounts off their grid. All gone. Thats how foreign banks “comply” with Fatca. Arguably some politicians say it was actually mean to work this way so us citizens behave nice and just keep their freaking money in us banks. I know of 3 friends who had to sold their hong kong based business because noone there would open them banking account anymore so here it is american politicans screwing over american citizens having business on a foreign land.

Do you have a source for your hundreds of billions (hundreds of billions what?). Compliance costs are usually baked in personnel and IT costs.

KYC compliance: A form and proof of identity.

Actually it goes a bit further than that.

It means to determine the actual beneficiery of a bank account in addition to traceability of the funds used.

The bloke showing id may not be the actual owner of the funds and it's up to the bank to determine this.

FATCA has nothing to do with KYC / AML provisions.

It involves, simplified, reporting requirements of US account holders by foreign banks to the US authorities. It's main purpose is to avoid tax dodging by US persons.

I'm not arguing that it's a great law, since it's not. For example: it can make it extremely hard for US persons living abroad to open a bank account because foreign banks just don't want to bother with those onnerous reporting requirements.

It has nothing, whatsoever, to do with KYC / AML provisions, which are very rightfully imposed on financial instituions. And yes, I work for one.

I bet you also can’t stand people who oppose mass surveillance. Those ignorant people! Don’t they understand the government is just trying to prevent crime?

Money is by far a more delicate topic.

I think it easily falls under the same umbrella.

Financial privacy, especially from the state, is the ultimate form of privacy.

There's a reason we have had bank secrecy [0] a long time before anything like the modern Internet-based privacy movements, with their much more expanded definitions, came along. Heck, some countries based a whole lot of their appeal on the strength of said bank secrecy laws, like Switzerland.

[0] https://en.wikipedia.org/wiki/Bank_secrecy

Unfortunately bank secrecy is quite over even in Switzerland. They constantly get pressured by the EU to share data regarding EU citizens' accounts. The hunt for taxes is ongoing, under the pretense of preventing money laundering. Yet something in excess of 200bn euros was laundered through the Estonian branch of Danske Bank.

why? Why is what you do with your money different than what you do with your speech?

A) Large criminal organizations bypass KYC/AML/ABC just fine.

B) Low-level crooks and privacy minded folks are the ones that get caught.

C) Cost of compliance with KYC/AML/ABC is greater than the money recovered.

https://www.forbes.com/sites/francescoppola/2018/09/30/the-b...

> In that connection, a senior employee from the correspondent bank in question assessed that out of ten non-resident customers from the Estonian branch, the correspondent bank would be comfortable only with servicing one given the customers’ characteristics. The employee also warned Danske Bank against Moldovan customers and customers transferring money to Moldova.

Criminal organizations just mule the cash to a friendly bank. Then things proceed accordingly and the correspondent banks will blindly play along for years.

The end goal of these things are not what is sold in PR-speak. It is about expanding the surveillance state for TIA purposes.

https://en.wikipedia.org/wiki/Total_Information_Awareness#/m...

https://en.wikipedia.org/wiki/Total_Information_Awareness

There is a reason they renamed this the "Terrorism Information Awareness" center and then "shut it down". But, of course, other agencies just quietly use the software instead with some superficial changes.

If you think any of these ever really get "shut down" because overreach or the like...yeah. They don't. They just re-named, classified, and better hidden in some intelligence agency's toolbox.

You shouldn't trust the labels on laws.

> Low-level crooks and privacy minded folks are the ones that get caught

Low-level crooks getting caught is how higher-level crooks get caught.

> Cost of compliance with KYC/AML/ABC is greater than the money recovered.

Recovering money isn't even the main overt point.

AML is bad because it makes a crime out of something which isn’t actually bad. Yes, criminals are bad people who do bad things and they should be caught & punished. But KYC/AML are about making it easier to find criminals by their behaviour, not about crime directly. They violate the right to privacy, among other things, but most people don't care because — by definition — most people are normal: they don't carry $10,000 across state lines; they don't pay cash for everything; they have state-issued identification. They don't care if abnormal people who aren't criminals are inconvenience or oppressed by KYC/AML laws.

Such 'abnormal' people can usually work within the law too, by declaring currency etc.

AML is good because it makes it much more difficult for the proceeds of criminal activity to be blended in to the legitimate economy.

Can you provide me with just one example why money laundring is supposed to be a good thing?

And can you explain how the average person is inconvenienced in any way, shape or form by AML / KYC regulations?

Sorry, but your argument, so far, is just libertarian drivel.

> Can you provide me with just one example why money laundring is supposed to be a good thing?

Money laundering isn't good; the actions which are termed 'money laundering' in the law are neutral.

> And can you explain how the average person is inconvenienced in any way, shape or form by AML / KYC regulations?

https://www.washingtonpost.com/nation/2018/09/01/police-seiz...

https://www.thestreet.com/story/12793654/1/file-10000-irs-fo...

https://ij.org/michigan-man-cleared-wrongdoing-still-fightin...

https://www.chicagotribune.com/news/nationworld/ct-customs-a...

https://www.forbes.com/sites/instituteforjustice/2018/05/15/...

And on, and on, and on. It's a real problem.

Money laundering isn't good;

Just a second, in your original post you say:

AML is bad because it makes a crime out of something which isn’t actually bad.

So which is it? You can't have it both ways.

You conveniently left out the second clause of the sentence: it’s not good; it’s neutral.

There are three moral valences: good, neutral & evil. ‘Money laundering’ is neither good nor evil, but simply neutral. The things it attempts to hide may be evil, but it itself has no moral value.

That is my whole point: criminalising it makes a crime out of something which is neither good nor evil.

Please do not cross into incivility or stoop to name-calling in HN comments.

https://news.ycombinator.com/newsguidelines.html

If it makes you feel any better I have been cut off from my CB account since around the time I opened it, because your ID (for password recovery) seemingly has to be issued by the country you live in. (And their customer support is non-existant). My bad for being unwilling to become a UK citizen for a few steak dinners worth of bitcoin I guess!

Nice snark.

In reality, a driver license is enough.

I was fighting with them over the same issue for several months in order to get access to GDAX. I finally gave up and used competitors services. I sent pictures (via their webcam tool) of drivers license, passport and green card, and they wouldn't accept any of them. Emails to support detailing my situation were always answered with useless canned responses. I like the simplicity of Coinbase, but their authentication procedure fails when dealing with people who reside outside their country of origin.

> they are being required to require new forms of ID and I cannot supply it.

Can't, or won't?

Where’s the line ? E.g. If someone asked me for a certified copy of my birth certificate, because of circumstances it would be an enormous slog. Expensive and time consuming.

Does that count as can’t? How expensive does it have to be before it’s reasonable to call it “can’t”?

I think the bar is lower than the semantics of the word imply. Can’t can mean “theoretically can’t”, but also “it’s unreasonable to do”.

Driver's license or other state/country-issued ID seems like a perfectly reasonable line. https://support.coinbase.com/customer/portal/articles/274981...

Not if it has to be issued in the country of residence, like mkohlmyr reported. For me that would be basically unachievable. Well, I could retake a driving test here, I guess. That’s quite a bar to clear, if you ask me.

I find it difficult to believe that a local identification card is a high bar to clear.

If you live in a country, surely you have some legal status there, which implies some sort of identification, no? How long would I be able to live in London without needing a local ID card?

Welcome to the EU. You know that “freedom of movement” that everyone keeps talking about re Brexit? That’s what this is. I can live here without any limitations.

But actually getting ID, that’s not an EU matter, that’s national. So it’s bound to the UK. Here, after 5 years living here you get to apply for official residency status. 10 years; nationality. But regardless of that you can live here (until Brexit).

So, yes. I’m not making this up. I’m not trying to prove a point out of spite. This is my life, and that of every EU migrant here, that I know.

None of which could be a CB user, if that requirement is enforced.

I broadly agree with this.

My sense is that KYC hurts individuals who value their privacy and maybe catches some mid-level crooks. The big criminals bypass it without much difficulty. The recent case of Dankse Bank confirmed my opinions about this. Here's a forbes piece: https://www.forbes.com/sites/francescoppola/2018/09/30/the-b...

> KYC hurts individuals who value their privacy

If you care about privacy, use cash. Only your income will be reported.

How do I purchase an mp3 or an ebook from someone in another region with cash? This is definitely something I would like to do.

umm, you could buy Bitcoin?

Damn bro I‘m rly sorry. I thought Bitcoin was a decentralized system free of government influence. That was the USP, right?

This is the objective, not the current state of affairs.

Ignoring the debate about whether these regulations are a good or a bad thing, don't you think that the fact that "the federal governments of the world" (not sure what you meant exactly by that) are capable of chocking exchanges and harming cryptocurrencies in the process prove that the dream of a decentralized, unregulated currency is out of reach?

Even though the bitcoin network itself is censorship-resistant clearly you're having issues at the interface with the real world. Doesn't that negate a lot of what made CC attractive in the first place?

First they ignore you. Then they ridicule you. And then they attack you and want to burn you...

To a certain extent it is up to us to chose what the "real world" will be, and preferring cryptocurrencies over existing objects seems consistent with many contemporary trends and aspirations (decentralized, auditable...).

Not necessarily. It only shows that CCs have not gained enough traction as currencies to deliver on that dream.

The theory is that you wouldn't really need crypto-fiat exchanges because opportunities to earn and spend cryptocurrency directly would turn up everywhere, and eventually crypto would just crowd out fiat because it's all-around better.

Well, turns out nobody really cares about censorship-resistance nearly as much as about getting rich without doing anything for it.

That’s ridiculous. Identity proofing is required for securities trading, banking, airline travel, car rental, etc etc. Those industries seem to be doing just fine. To say that KYC/AML is the main force behind the bitcoin sell-off is an outlandish leap that ignores literally every other flaw of bitcoin as an “investment” - and there are many.

> This is also the result of the federal governments of the world

Why federations in particular?

It seems like the bitcoin selloff coincided nicely with the general stock market selloff. I think someone wanted out of bitcoin after staring at a flat price line for 6 months.

Someone wants out and they know there's limited buy side liquidity. Once the primary market maker algos detect a big move, they get out of the way so they aren't overexposed long or short. Once they pull the liquidity it becomes a race to sell first.

As a stock market investor, a flat line for the past 6 months sounds pretty good to me!

but no dividends.

The Saudis facing confiscation and raids back home dumped their cash into Bitcoin which fueled the rally to $20k. They are now pulling the money out.

I never heard this one... what do you have to back it up?

Jonathan Nelson, Managing Director HACK Fund discussed this on last week's sharespost webinar. The slides and replay should be up soon if you check their site. Discussion was titled 'State of Crypto Markets and Regulation: USA vs. the World – SharesPost Expert Series'

The vast majority of cryptocurrency transactions are in Asia, meaning China, Singapore & Japan according to a sharespost webinar I tuned in to last week. Getting money out of China has been a driver of cryptocurrencies in 2017 and early 2018, with little utility other than moving money around to invest in safer havens.

I can see Chinese capital flight as a driver of transactional bitcoin. How does that lead to holding bitcoin as an investment?

This reminds me of an anecdote from Liar's Poker where the writer talks about how not even the oil traders understood what caused the price of oil to move and so they'd just make up outlandish stories about the Saudis.

And Santa wears a hat

Sounds just like a ponzi scheme bursting. No surprise.

Ponzi schemes tend to collapse quickly and spectacularly.

Yup. Liquidity isn't something you need to care about if you trade something listed on an exchange, at reasonable volumes (neither very tiny nor enormous). If nobody else wants it the market makers will automatically take the other side of any trade at the listed buy/sell price, and keep the difference, that's their job.

But Bitcoin, BBS stocks, weird instruments that aren't listed anywhere, those you can only sell if you can find a buyer, if there is no buyer (or no buyer at the volume you care about) then the "price" doesn't mean anything at all.

LOL, numerous listed stocks are way more illiquid than bitcoin.

I discussed the things that happened specifically on November 14th in my Quora answer: https://www.quora.com/Why-did-the-price-of-Bitcoin-plummet-d...

It's very very likely because of the Bitcoin Cash fork. It has become a pissing contest between Roger Ver (Bitcoin ABC) and Craig Wright (Bitcoin SV). While Craig trolls and threatens the Bitcoin ABC side by "bleeding them dry" in a hash war.

Jihan Wu, founder of Bitmain quoted: “I have no intention to start a hash war with Craig, because if I do, by relocating hash power from BTC mining to BCH mining - BTC price will dump below yearly support; it may even breach $5,000. But since Craig is relentless, I am all in to fight till death!

The war is related to Bitcoin as the price of Bitcoin tanks because in a hashing war, both sides are likely to rent hash from the Bitcoin mining pool. This is being settled in Bitcoin, sold on the market to cover electricity, and thus suppressing the price of Bitcoin.

Since Craig is trolling around, threatening a price of $1,000 per Bitcoin in a full out hash war, people are selling before it gets even more ugly.

Another downside which reinforces the price suppression is for Proof-of-Work systems (where miners are rewarded based on their computing power), there's an unfortunate feedback loop in price drops. As said by Colin, founder of Nano currency, Low price -> low mining rewards -> turn off some miners to lower cost -> lower hash rate -> longer transaction confirmation -> lower price.

More details can be found in my Quora answer about this.

I think it's fascinating that this is 100% different than what Bitcoin was sold as.

The theory of Bitcoin was basically "money without people". You wouldn't have to worry about governments and politics; value would be sent and stored in pure pieces of math. Mere governments couldn't possibly do as well as the glorious algorithms wisely fixed in advance by, etc, etc.

But if you're right, Bitcoin has way more politics than a third-world kleptocracy. And it clearly lacks the institutions and formal procedures used to shape those kinds of political currents into useful effects on the currency and the economy.

There is differences between the white paper and the implementation. There is also another elephant in the room... whales who have enough money (thanks to crypto currencies) to influence things.

The problem here is not Bitcoin per se, it is the current state of the real world, where anyone can "buy" and "sell" Bitcoin for legal tender.

Bitcoin, in a world where it is the sole currency, has the benefits you quoted.

No. There are currently two super powerful individuals fighting and are allegedly dragging down every thing on the market just because they don't like each other. What makes you think that this would be a good state of affairs for a world currency?

According to this explanation those super powerful individuals "sell" Bitcoins for fiat in order to pay the energy (electricity) they use in order to mine another currency. It is only possible because Bitcoin is not the sole currency.

The current financial system faces such battle-ordeals and isn't immune, remember the Black Wednesday.

> According to this explanation those super powerful individuals "sell" Bitcoins for fiat in order to pay the energy (electricity) they use in order to mine another currency. It is only possible because Bitcoin is not the sole currency.

Doesn't it? What changes if you take out the fiat intermediary and buy energy (a fungible, near-universal production input and end-consumer product in one) directly and the competition is about a commodity that is not a currency?

The Bitcoin "value" (the buying power it confers) will be mainly determined by bulk transactions and by factors of high-inertia (changing them radically and fast is impossible), not by investors. One of such last factors is the cost of energy production and storage, another is the efficiency of mining equipment and the associated willing to amortize it. Therefore it will be much more stable, and it seems to be the main problem at hand.

>There are currently two super powerful individuals fighting and are allegedly dragging down every thing on the market just because they don't like each other.

Kind of like how nations compete and in the process to drag everyone else down: Like US and China trade war.

If the design of bitcoin requires it to be the only currency in the world, then it will never function correctly.

No true Bitcoin has this problem, of course.

> The problem here is not Bitcoin per se, it is the current state of the real world

If Bitcoin doesn't work in the real world, that's a problem of Bitcoin.

> Bitcoin, in a world where it is the sole currency, has the benefits you quoted.

If Bitcoin doesn't offer sufficient benefits in the real world as it is without being the sole currency in the world, there's no plausible route to it becoming the sole currency.

“My clever idea is great if everyone wakes up one day and abandons all other alternatives for it, but not otherwise” is a long winded way of saying “my idea sucks”.

It may be a process rather than an abrupt change, just like most evolution.

Adoption/revolution.

Ah, of course. Bitcoin can never fail, it can only be failed.

There's no money without people. Money needs people's confidence to work as an exchange vehicle or value store. Jasonwen's theory seems correct if the facts are looked at as a collapse in confidence. If this is true, we shpuld also see capital flight to other cryptocurrencies.

It seems to me that the price is dropping due to large players selling off their coins, not because of some hash-war. AFAIK, mining Bitcoins is barely profitable anymore and wouldn't cause such wild jumps (even if this is true).

Perhaps the recent SEC action against multiple ICOs is contributing too?

Long story short, the American regulator has determined that the 2017 hype-fuelled ICOs were unregistered security sales (just like everyone said they are, but ICO promoters pretended to hand-wave away by mumbling something about utility tokens). They've fined an initial wave of ICOs to the tune of $250k and mandatory refunds to all who bought tokens in the ICO.

The catch here is that the refunds must be paid in USD, but the ICOs mostly raised in cryptos. If you did an ICO in December 2017 and raised $10M worth of cryptos but never cashed out any of it, your treasury is now perhaps worth only $2M, yet you're liable for $10M USD refunds. Any ICO administrator within reach of American regulators ought to be cashing out while they can...

I wonder if ico issuers are selling off btc and eth in order to have enough cash on hand to do the asset buybacks and still be ahead.

Anyone who ICO'd in early 2017 (including big names like tezos and filecoin) have enough USD value of btc and eth to comply with the SEC and still have 9 figures left. It's a good time to take profit if you did that, get off the hook and still be incredibly cash wealthy.

That would also explain why ripple is still stable, not as many icos hold xrp as btc and eth

To me, it’s obvious that the Bitcoin Cash “hash war” has been what’s triggered the fall of the 5K support level (and to me, it’s telling that 200 messages in, no one has really even mentioned it).

The contentious fork has been very disruptive, causing BCH trading to be halted and lowering trading volume across the board. At the same time you have a huge redeployment in mining resources, up to 4exa on the Bitcoin.com pool alone pointed to BCH to defend vs a BSV takeover attempt (along with threats of 51% attacks and long range re-.org attacks) - up to 30% of SHA-256 mining power was pulled, mining at 100-200% less profitability of BTC, which also would have had some pretty big effects on the market (potentially parties dumping BTC to fund hashrate, potentially other miner related effects).

This sort of shakiness/distraction/fud drives the whole market down, which drives more selloffs, which drives articles and discussion like this, repeat.

Now that this seems to be largely over (and exchanges are opening BCH/BSV back up) you’re actually seeing a bit of a price/volume bump after this cratering, although I think people will be skittish for a while. I think it’s right to be skeptical - the people that are building real things will keep doing so, largely under the radar, and the markets will do as the markets will.

I’ve never understood the commonly held view that miners can effect the price. The distribution of coins is on a fixed schedule it shouldn’t matter how many miners there are. Price should not change from any of that.

This may be more related to rapid liquidation of holdings which does affect the short term. Long term it should average out.

> The distribution of coins is on a fixed schedule

No, it's not.

The distribution of coins is affected in the short term by the actions of miners; it has periodic difficulty adjustments to intended to target a fixed long-term rate, but it is not a fixed schedule.

More important than the change in newly minted coins is the fact that the miners (in this atypical case) are selling btc for fiat to buy energy to outmine their competition.

The public is finally seeing the structural weaknesses in crypto. The sales pitches never really talk about forking or it's impact. Now it's clear, I think, to most layman investors that forking is going to result in a long-term erosion of crypto value.

Each fork is dividing the value of your holdings, and most people don't have enough information to know what to do about it. Initially, they might be happy they doubled their holdings, but when the sum value of the forks don't add up to the pre-fork value, then people will eventually feel like they are getting scammed and exit.

I can't swear that it's the cause, but it looks like expectations have changed around whether ICOs would be required to classify themselves as securities: https://twitter.com/prestonjbyrne/status/1064714421061255168

This has been obvious to everyone paying attention for a long time, but most people in this market are there because they don't pay attention.

As a counterpoint, bitcoin has dropped faster than Ethereum, the principal ICO platform.

Only because Ethereum dropped significantly more earlier in the year (from $293 in September to $193 a few days later...)

"I'm really curious if somebody here could venture a guess about the reasons for the sudden drop"

A more telling question is how it has held any value at all for as long as it has. There was a period where BTC's rise was rationalized via its promise to become the currency of the future. Does anyone actually believe that now, though? BTC instead has become nothing more than a speculation vehicle built on a foundation of absolutely nothing. No rational analysis sees it being the basis of really anything at all, and that mad rush has seen an outrageously inefficient system put in play. It wouldn't be bad if it were actually the basis of meaningful purpose, but instead GWs and GWs are going to effectively nothing.

I suspect at some point a psychological threshold is going to be hit and BTC is going to plummet through the floor. A lot of very specialized hardware is going to derelict.

As an aside, many of the comments in this discussion, and the moderation of the same, is indicative of how profoundly irrational people can become when they have skin in a game. If I held BTC I'd probably be trying to rationalize why it should be worth something, against all rational analysis.

TF are "GWs and GWs" ?

GigaWatts

Main reason likely natural down cycle following parabolic run-up. Remember btc/crypto still a global, minimally regulated market driven by and large by unsophisticated retail investors (though pros are increasingly getting in). Domino effect / reflexivity on way up and on way down. Marginal buyer was simply exhausted at some pt, and institutional demand expected to be next big marginal buyer didn't materialize as quickly as people thought.

That said one guess on a trigger for the most recent sell off was that Bitcoin Cash, a fork of "reference" Bitcoin, forked in a bigly hostile way, resulting in two new Bitcoin Cash chains (Bitcoin Cash ABC and Bitcoin Cash SV - for satoshi vision lol) each now with its hash power majority controlled by one group e.g. highly centralized. The market is confronting the possibility that proof of work -- the most widely used consensus mechanism -- is way more centralized than it thought, and way more subject to value destruction from a tiny % of people.

Ongoing concerns about Tether can't have helped.

https://www.bloomberg.com/news/articles/2018-11-20/bitcoin-r...

> As Bitcoin plunges, the U.S. Justice Department is investigating whether last year’s epic rally was fueled in part by manipulation, with traders driving it up with Tether -- a popular but controversial digital token.

> While federal prosecutors opened a broad criminal probe into cryptocurrencies months ago, they’ve recently homed in on suspicions that a tangled web involving Bitcoin, Tether and crypto exchange Bitfinex might have been used to illegally move prices, said three people familiar with the matter.

The latest bubble continues to deflate. I'm not about to make any predictions at all, but a drop to 1500 or so would be quite "normal" for Bitcoin, historically speaking. Again, there's no particular reason to think it will go there, or if it does, stop there. The volatility in crypto is just so high it's hard to say there's any particular reason for price movements beyong trader's reactions to price movements.

With BTC this is just normal volatility. The usual drawdowns that are happening every 1-3 years are about 75% - 95%. If the price of BTC goes under $1000 that will be something new.

I can't speak of other coins as they are a very different market (and I'm a Bitcoin maximalist).

Demand will not recover.

This probably won’t age well

By "Bitcoin maximalist" I assume you mean you want to see it enter widespread use as currency? Any thoughts on the extreme environmental downside of BTC?

Existing (non crypto/legal tender) also has environmental downsides. Is there a serious study comparing the environmental downside of currencies (crypto and not crypto)?

It means that I think it will eat all money (and most altcoins as well) over the next 15-20 years.

About the downside: I hope using coal as an energy source will be shut down ASAP. Bitcoin protocol would easily work with only sustainable energy sources, but it doesn't work without the security of proof of work (all other algorithms for decentralized concensus so far decrease security of the protocol).

Luckily China already took some steps to close down the most polluting Bitcoin miners.

I think the bell that rung at the top was the same bell I've seen in other speculative markets: The main people you would expect to see cheerleading throw in the towel and say it's crazy. That happened writ large at the beginning of 2018. There was one presentation at a Bitcoin conference I went to in early 2018 where this long haired huppy guy went through CoinMarketCap and called out every single thing on there as bullshit and scams.

Any chance this talk was recorded? I would love to watch it!

It was at the world crypto economic forum. I can't remember who it was, but he had a beard and olive skin, so that should hopefully narrow it down a bit. I just stumbled in there while wandering out of another presentation I thought was dull. I think he was going off script for whatever the topic was.

For all the hype, bitcoin really is not worth its price to me. I would not sacrifice 4k to have 1 bitcoin for its use today. Its expensive, slow and inconvenient to transfer.

When it hit 18k-20k last december it was absolutely nuts. Bitcoin is not there: it has no mainstream product market fit. Its pretty useless. And it hasn't been fulfilling its expectations of not being so.

What do you think about Gwern's article on Bitcoin from 2011?

https://www.gwern.net/Bitcoin-is-Worse-is-Better

Lightly scanned the article. I dont criticize bitcoin for being imperfect, but for being useless as it is today.

Moving dirty money, or escaping capital controls is great, but still a very limited use case. Its really impractical to do any mundane thing. I.e. replacing credit cards and buying your coffee would be a massive human landmark event. But its not close to that, and there's no clear path to that.

So why would you spend 6k to hold this piece of land today, when that buys you a 3% secure yield or a many other investments with greater returns.

It was quite useful to people getting money out of China.

I like to think it's because of this article:

https://www.nature.com/articles/s41558-018-0321-8

Nothing has soured me more on bitcoin than its impact on the environment. If for no other reason than that, I'm done with it.

I mean I hear ya but it seems a little bias when they are 'projecting'. I mean, if I had 0 wives last week, got married this week, does that mean in 2 months i'll have 8 wives? (no i am not in UT)

"Here we show that projected Bitcoin usage, should it follow the rate of adoption of other broadly adopted technologies"

Even today bitcoin is a serious energy concern. Currently the network uses as much energy as Denmark, while commanding a 0.033% share of cashless transactions. Which countries will bitcoin surpass in energy usage in 2019 as mining gets exponentially more difficult by design?

> On the other hand if, like I believe, it's mostly scams, empty promises and poor understanding of technology and/or economy, then this might be the beginning of the end.

There are several startups that have made progress but not enough progress that the value of their token has increased through network effect. The Brave browser has 5MM MAU. There is still a lot of development to be done to whitelist ads and pay users for their attention. It's a good start though.

Other startups are starting to realize that on boarding new users with Meta Mask doesn't work. The users unfamiliar with cryptocurrency exit the funnel early because installing a plugin and depositing money makes the experience much more difficult. This is the case with FunFair currently.

Increased adoption probably won't happen until 2022. Because these assets are liquid it's likely we'll see an even bigger drop until then.

"somebody here could venture a guess about the reasons for the sudden drop"

It has no inherent value, is a poor currency substitute, it is a poor store of value, and is on a long term trajectory to zero. People are realizing this and liquidating large/low basis cost positions.

This may all be true - but it fails to explain why it crashed now (as opposed to 2 months ago, or 2 months hence).

the recent fork/shit show within the bitcoincash camp (im not getting into this debate just an observation) resulting in 2 forks and split in hash power. the camps being btcsv and btcacb. yes those are their real names, and I think they're all stupid

> ... the camps being btcsv and btcacb. yes those are their real names ...

I think you might have a typo, I believe it would be btcabc:

https://www.bitcoinabc.org

you're right mb

Why would it affect BTC, let alone ETH and others?

I'm really curious if somebody here could venture a guess about the reasons for the sudden drop

One could probably write pages on the topic, but here's my one sentence summary: reality didn't match the hype, and markets are coming to that realization. Corollary: hype-driven price goes up much more slowly than reality-driven drops.

Simplistic though it might be, it's the reason for most big drops in equities markets. That biotech that might be on to a cure for prostate cancer? Up and up she goes...until the FDA trial says it doesn't work. New battery tech company says they'll have batteries that can drive you SF->NY and a full charge takes 30 seconds! Buy, buy! Oh, BTW, the batteries will cost $10K/kWh. <effect: dying_PacMan_sound/> New way of paying for things that will eliminate cash, and all the geeky kids are into it? Those nerds know what they're doing, right? 'cuz I sure don't, and I don't want to miss out! Oh, all I can buy are illegal drugs of unknown quality, and I can lose all of my money if I forget my password or make one tiny mistake and the hackers get it? I bought in at $19.5K, why isn't it still going up? Be glad it's only down to $4500.

> could venture a guess about the reasons for the sudden drop

It has to decline, I was giving it 2-5 yeas, but it seems it dropped much faster: https://news.ycombinator.com/item?id=15760415

As for the faster than usual now, my guess is few things. Main contribution is NVidia that had their earnings report, they told the planet flat out gpus aren't selling as well, so the gig that everybody is increasingly mining was called up. Normal people check out, traders can't trade if they can't short it and it's starts going downhill. So anybody that's in the business of not losing money stops the bots. But nvidia the most visible thing that creates sentiment among the crypto-evangelist population it seems.

The other reasons wound be, end of a 40 year bull run across western democracies, end of the minor cycle economy run, add to that a trade war, QT, people overexposed on the houses with HELOCs and stuff from that QT, and everybody will be pulling cash from everywhere since cash will matter fairly soon.

The rest is standard, stock market drop by 20% or much more, asset bubble deflation, etc etc. It's all fairly cyclical.

Hasn't GPU mining been unprofitable for at least five years now? I remember everyone moving to asics back in 2012.

Any GPU mining is assumed to be on Ethereum, Monero, or ZCash. Which... at least a few months back... remained profitable. I don't know if its profitable anymore since the prices have dropped so dramatically.

> Main contribution is NVidia that had their earnings report, they told the planet flat out gpus aren't selling as well,

You've got cause / effect backwards. The slide started on Nov 13th, while NVidia's earnings report is Nov 15th.

The NVidia thing was my first hypothesis too. But it doesn't seem to hold up to scrutiny.

Maybe. Although excluding nvidia would have to include a requirement ER leaks don't happen. On something as semi-legal and connected to all sorts of shady as bitcoin.

> Main contribution is NVidia that had their earnings report, they told the planet flat out gpus aren't selling as well, so the gig that everybody is increasingly mining was called up.

So... you know absolutely nothing about Bitcoin, do you?

There is zero connection between Bitcoin and GPUs, except maybe indirectly via other cryptocurrencies, but then those would show the effect stronger.

> breach $20k again

This is so unreasonable for a piece of data which was worth $0.1 a decade ago and is easily cloneable (trivially if not for network effects and integration)

Currency and crypto are only made of network effects, so..

The entire concept of bitcoin requires the network effects and integration. Pretending the hash value of a block is useful in any way without them misses the entire point of its existence.

Speculating here but if you look at the price graph this year it looks like someone was trying to prop it up and keep it above $6000. Maybe tether/bitfinex or the Chinese miners, dunno. But anyway this would require $17m or more coming in to the market each week to cover the mining rewards. Maybe that dried up and the buyers ran out of money, then once it broke people tried to sell out before it got worse?

Perhaps a dumb question but how do you know it was one person/organization as opposed to general market forces?

Huge spoofed orders: https://hackernoon.com/meet-spoofy-how-a-single-entity-domin...

Huge influxes of Tether: https://www.nytimes.com/2018/06/13/technology/bitcoin-price-...

I guess you don't really know unless there is some inside type information. Often currencies are officially supported by governments but with bitcoin the parties seem secretive.

I don't having much to say about fundamentals. From a technical analysis point of view, according to EWT, a correction mostly happens in three strokes. First stroke was 20k->6k, second was a year long sideways move, this is the third one that will reach the extreme of the correction. In these terms, what we're seeing this last week is an extension of what was happening beginning of 2018; i.e. to ask why this happened is the same as to ask why the price fell from 20k.

Well, there's also some news about the Tether probe: https://www.bloomberg.com/news/articles/2018-11-20/bitcoin-r...

ETH isn't doing well either, so there must be more than the BTC cash fork in play.

BTC is strongly linked to the rest of the crypto market. When BTC drops, the rest follow almost always.

I am nobody to speak for the market, but if I were the market my rationalization would be the prospect of Algorand

I predicted last fall there would be a huge sell-off as short term cap gains (35%) turn into long term cap gains (15-20%) at the 12 month mark. Time to lock in the remaining profit and realize those gains.

It's the holidays and the market is a bit bearish on crypto so folks are selling to free up some $$$

Wrong hypothesis: the big run up started exactly this week last year.

That big run up was at the tail end of a slow and gradual incline which contributed to the massive bull rush. Now the market has been in a slump so easy timing to dump.

Occam's Razor - could just be a symptom of the current stock market crash.

What stock market crash? Vanguard’s Total Market Index (VTI) is up 2% for the year, and only down 10% from its All Time High (excluding dividends):

https://finance.yahoo.com/quote/vti

Tech stocks aren’t the whole market.

True but a lot of Bitcoins investors probably get disproportionate amounts of equity compensation in that part of the market.

Even index stocks are in free fall right now. Check again. VOO has dropped 1.5% today, which is pretty bad for an index stock.

> VOO has dropped 1.5% today, which is pretty bad for an index stock.

Uh, what? An index stock mirrors, as closely as possible, the market it's indexing. If the market goes down 1.5% - which is extremely common - so will VOO.

I think GP meant it is pretty bad in the market if the composite index average (and thus index ETF) is down 1.5% in a single day.

Which is a silly claim. The markets being down (or up) 1.5% is an unremarkable trading day.

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs...

Per this chart, almost 20% of Dow trading days fall in the 1-2% change range.

Aaaaand vti is down for the year. Imo stock market has just crashed.

>Imo stock market has just crashed.

Were you alive in 2008?

Barring time travel, I'm not sure how a stock market correction starting in September 2018 can cause a Bitcoin crash starting in December 2017.

He's probably talking about the most recent drop. BTW, what bitcoin crash? I'm still up over 2000% ... /s

> BTW, what bitcoin crash? I'm still up over 2000% ...

An individual's stocks being up during a recession doesn't mean there's no recession, does it?

Sorry, I know that sarcasm can be difficult to detect in writing.

Obviously he's referring to the current value compared to the high last year. You know where the current price of bitcoin is over 75% less than it was last year...

Any time something loses 75% of it's value (and still dropping) and you say, "what crash?", you're not fooling anyone but yourself. Even if you got into bitcoin on day one.

I was being sarcastic.

was thinking the same thing. and... it's not (yet?) a 'crash' but we're definitely seeing a downturn in various sectors - apple/fb have been down at lot in the past few weeks. Assuming some correlation between "tech" in a broad sense and "crypto" doesn't seem too far-fetched. Loss of some confidence in one area might be bleeding over in to another?

Quite the lexiphanicism aren't you?

Not purposefully I assure you. English is not my mother tongue and I know that my vocabulary is all over the place at times. If you have some feedback about things I could've worded better I'll gladly hear it.

If you're going to use a fancy word like lexiphanicism to criticize someone, you should at least use it correctly.

("Lexiphanicism" does not refer to a person, but to their use of language.)

I am a firm believer that cryptocurrencies can offer major value to the world. But if you look at what's out there, Bitcoin etc are outdated technologies.

Since Bitcoin was always leading the charts, in my opinion the whole market had to crash, and out of that it will show which ones offer true value.

You shoudn't focus too much on price, but mainly focus on applicability and adoption/use.

Most doctors here only offered cash payments, but nowadays a lot of them offer smartphone payments. They lose 6 cent on every transaction.

Imagine a world where I can pay instantly, worldwide with a single currency, 0 fees. The technology is already here, the adoption not (yet ;).

We have email, which is basically instant, free and worldwide. Why can't we have the same for payments? Only time will tell if such a major shift can happen.

The thing is that the trading price of crypto does not mean anything to its adoption or utility. You can write a payout algorithm that grows the monetary base so fast the price can't appreciate. That coin could become unbelievably successful without ever being a viable dragon horde to sit on of endlessly growing value due to scarce supply.

Its really a reflection on the doomed state of the mainstream crypto mindset to only really care about getting rich quick in fiat off cryptocurrency bubbles. Bitcoin doesn't matter as a currency, it matters as a pyramid scheme. The people investing in it for personal financial gain dramatically outpace those trying to use it to overthrow fiat hegemony.

There have been coins like peercoin and Steem that have in small regards or parts tried to push the adoption envelope as a usable exchange medium over the pyramid scheme, but they are few and far between and their general unpopularity really shines a light on where the scenes true values lie.

>We have email, which is basically instant, free and worldwide. Why can't we have the same for payments? Only time will tell if such a major shift can happen.

Ever had a free email account compromised? Good luck. Not to mention email isn't free. Someone is paying for it and making money from it. Even if that is concealed behind several layers that aren't obvious to most users.

"Most doctors here only offered cash payments, but nowadays a lot of them offer smartphone payments. They lose 6 cent on every transaction."

What's the opportunity cost of adopting a completely new payment system versus losing 6 cents on an already very expensive transaction?

> We have email, which is basically instant, free and worldwide. Why can't we have the same for payments?

We're getting there, but we're doing it in the mainstream space, not the cryptocurrency space. Within and between an increasing number of countries and groups of countries, this is becoming possible.

But between banks, not with distributed wastes of power like Bitcoin.

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