First Bitcoin "Depression" Hits
dailytech.com
dailytech.com
Seriously? Check MtGox more closely. Even down at ~$10 where it is now, only the extremely-new users who bought it at skyrocketing prices got screwed. And by "extremely-new" I mean extremely. The prices are still above where they were less than a week ago.
What we just saw was the bursting of the first large Bitcoin bubble, not the first depression. Depression for the people who bought during such a freakish rise, yes, but there will always be winners and losers in any economic game.
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edit: On a side note, I've found Paypal's "excuse" for not allowing transactions with Bitcoin merchants a weak one at best. Why, then, have they allowed exchanges with Linden merchants like VirWoX for the past three and a half years?
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edit2: wow, this article gets worse and worse:
>Mt. Gox is the world's largest bitcoin exchange, but it's suffered from major liquidity issues in recent weeks. The recent massive inflationary drop is also a sign of poor controls at the exchange.
Two questions: 1) why did Mt. Gox suffer? They're a trade tool, all the action has only been good for them, to the tune of 0.65% of each trade! 2) they're an exchange. If they wish to exchange at market price, what "controls" would you expect them to put in place? People pay what they want to pay, that's the way MtGox has always worked, they're just an intermediary.
I believe you mean to say 'financial' here, in place of economic.
Regardless, I disagree with the veracity of using either term in that sentence but, apart from people like myself, you'll find much more solidarity in denigrating "finance" over "economics."
I'm not sure how much of that was going on in the first place, but isn't it the goal?
But you could if trips to the moon were a daily occurrence, and the flow of moon rocks were relatively steady. Or compare buying stock from startups vs the Fortune 500. Bitcoin is too small to be reliable now, but the bigger it gets, the more resilient against such booms and busts it becomes. It's pretty well established that it's not a stable market right now, but that's obvious and it doesn't mean it won't become so.
For what it's worth, MtGox claimed Dwolla switched their API around for their "Grid" product without any forewarning (big round of applause for oAuth, everyone!), and got the API issues fixed a couple of days ago. They've been more upfront and communicative ever since.
When you're talking about movements in currency crosses, as the article does in focusing on the BTC/USD rate, there are a bunch of different reasons that can move it. At the core though, there are two sides to a large drop in the value of a Bitcoin vs. the USD. You can have a large number of people wanting to dump BTC, OR you can have a large number of people wanting to acquire USD.
Note that the article itself talks about the turmoil in the US equity markets on the same day. This usually creates a demand for USD as people require it to meet margin calls or pay off debt which is denominated in USD. I'd bet on this being the primary cause. In fact, if you look at the USD vs. any other currency (EUR, JPY, etc) it rose in value against just about everything today.
The other reason, which I consider less likely, is that people decided to drop BTC en masse for some other reason which is as yet unknown. This appears to be much less likely, although it can't be completely counted out.
In short, the USD rose against just about everything today, and the BTC market seems to have been affected more than most--primarily, I'm assuming, due to the relative illiquidity of that specific market in general.
People that don't have the money to buy bitcoins and see them appreciate are jealous of the ones that do. They hide their insufficiency and jealousy by calling it a ponzi scheme or scam, so they can simultaneously feel superior to the bitcoiners whilst tricking themselves into thinking they wouldn't buy them anyway even if they had the money.
It'd also be a fear that one day they'd have to work on a bitcoin project, which would be rubbing salt in the wounds.
Fact is, there are tons of hackers that could contribute a lot to the bitcoin ecosystem, but they take the negative route instead: they don't want to give anyone a free ride (or they like their rut.)
I could go on, but there are some anti-Israel type tones in the anti-bitcoin brigade, that's my feeling when I write anything positive about bitcoin: I may as well write something positive about Israel.
For many, bitcoin.org is the startup, and buying the currency is the investment. People would upvote any story about their startup, and they'd upvote anything about bitcoin. It's a fair thing to do.
Bitcoin is an extremely hacker-ish thing. It is a hack on the money supply. It is as revolutionary to money (the concept, perhaps not the implementation as yet) as mp3 was to music, or blogs to writers. It has hugely positive implications, so people that hate it, will Really hate it.
I think 30$ was simply a very attractive exchange rate, so a lot of people decided to sell. That's all there is to it.
Though I have to say it is fun to experience this with BitCoins. There certainly was a feeling of "damn it, sell now or wait for even higher prices???". But as far as I am concerned, it is still more like a game, so I am not depressed if I lose out on the highest prices.
Maybe lots of people started buying drugs with BTC and hence demand went up, or whatever.
I am also happy about the money I made. But I am not chiding myself for not selling more BTC at the peak. Maybe if they dropped to zero value I'd be a bit remorseful :-)
I guess another reason why I don't feel depressed is that I always meant to keep some of them as a long term investment. Just curious to see what happens when supply of new BitCoins starts to slow down. Of course I am not the only one thinking like that, so there are a lot of BitCoins out of circulation atm.
It currently does ~580MHash/s and consumes about 300Watt - not too bad compared to other miners, it seems to me. Also, if it survives the mining, maybe I can one day use it as a gaming PC if mining becomes unprofitable.
I was lucky that a friend offered to host it in his cellar, though - would have been too noisy for my flat.
Awesome.
However, if you first route your IP through Tor -- an anonymizing service, you can make it extremely difficult for anyone to trace you.
Silk Road is only available through Tor; it can't be accessed from the clearnet unless you use something like tor2web.
https://en.bitcoin.it/wiki/Anonymity
If you want more anonymity in Bitcoin, run it through Tor and have the setting noirc='1' in your ~/.bitcoin/bitcoin.conf. Also, Tor is more anonymous for you if you act at least as a middle node, what also helps the network.
>> "(Source: Google Images)"
What? Does Google Images offer own original content?
So sure, probably some component of the initial rise was a bubble, but it's important to remember that the actual utility of bitcoins also went down significantly preceding the price drop.
Perhaps people are worried about Gavin giving his CIA talk in two days. Perhaps Russians were funneling money again (like with egold when it was shut down) and completed their trial run. Perhaps some investor got wind of this cool thing called Bitcoin and told his assistant to buy in $150k (that alone would move the price +$10), then sold a week later. Or perhaps it was the non-stop increasing media coverage of Bitcoin in the past month. Or perhaps it was the weekend when it's harder to get money into MtGox and the psychological perfect storm of speculators manifested.
TSR was around since February, with steady growth up until the recent spike when they closed to new users. Perhaps that was a factor, but I doubt it was a significant one. I imagine most people who bought coins don't have Tor installed.
;)
I think to get some stability and potential longevity bitcoin needs to be used more like a currency. IE be used for buying and selling stuff. That's a difficult piece of this puzzle. I can't think of any possible catalyst for it.
Can anyone explain to me how bitcoin might become something that a large number of people use to buy & sell goods and services?
For example I bought some T-Shirts at SquareWear.biz. Upon checkout I get told a bitcoin address I enter into my client to transfer the required amount of BTC. A couple of seconds later squarewear knows I transferred the BTC and all is done. No registration with a payment processor required.
Another example: in my blog I once offered 0.1 BTC to the first five commentators on a blog post. Try that with other payment methods. Maybe money wires would work, but then not internationally without high fees.
In any case, if you accept online payments via credit card, there wouldn't be much point to converting them to bitcoins after the fact, unless you actually prefer to hold BTC instead of USD. You've already paid the transaction fees.
The other option is the less radical add a bitcoin payment option. This is basically just using bitcoin as a payment method rather than a currency.
If merchants are using btc themselves, it becomes trivial for people to want to use btc to trade with them. Are there any non shady reasons for preferring btc though? Why would you want to accept a volatile new currency when all your expenses are in a different currency?
The more I think about it the more I think that btc will need to bootstrap from some sort of tangent: goofy investment medium, payment processing technology, gray markets...
Might become the currency of the underworld.
That's not really a currency. It's a payment processing service.
I guess it has to go through this sort of thing while its small.
How do they get confirmation in a couple of seconds? I thought you had to wait for a new block to be generated/mined in order to have a confirmation?
Would anyone actually exchange real world goods for bitcoins if the exchanges close following a sudden drop? Am I missing something, or would this just drive the value (temporarily) to zero?
The drop is also not the first bitcoin has had. It's been highly volatile since the beginning.
This is just sensationalism.
I would assume given the types of people that BTC would appeal to that they presume the US will persue a very expansionary monetary policy for the foreseeable future. Maybe the gov't announced news that would suggest raising interest rates or balancing the budget.
It could also be a sign that people are starting to do hedge fund type operations with BTC. If you wanted to invest heavily in BTC using a few hundred K to depress the price may be advantageous given the instability of the currency.