Bitcoin Falls 20% on PBOC Rumors, Chinese Exchanges Reinstate Fees
thegenesisblock.com
thegenesisblock.com
[2] https://en.wikiquote.org/wiki/John_Maynard_Keynes#Attributed
The gist of it was that BTCChina's long game was to kill all competition (by being first, and zero fees), wait for the surge of new users to taper off (market saturation?), and start charging a fee once they've monopolized the market.
The OP further speculated that they must've interpreted the change of regulatory climate as disastrous, expect a major exodus, and have implemented trading fees to get at least some profit off the activity.
Or is the bitcoin exchange market a "winner takes all" market?
And if they "win" and start charging a fee, wouldn't it immediately open a new opportunity for someone to come up with a platform with lower fees?
(honestly asking... Btw I'm european and I'm on Bitstamp for trading Bitcoins)
As for competitors lowering their fees - one can onlly do it as long as it has funding to do so.
Here you can witness a perfect example of a free market economy leading to a suboptimal situation. And an example of usefullness of antitrust laws.
The fees were about to come. The timing is a bit puzzling but really it's been a while already since the announcements (in BTC time-scale a few weeks is a lot of time).
I fear this might be dire to the Bitcoin economy. Skirting wealth flight laws WAS Bitcoin's killer feature. All of the other Bitcoin use cases I know of are incremental in nature (ie, 2.5% savings on e-commerce transactions).
The open question is if enough of a hype-market was built to keep the other use cases alive. In the case of e-commerce, I assume a rational merchant only accepted Bitcoin because of 1) viral marketing channel 2) speculative hoarding.
The speculation MIGHT work out if the underlying Bitcoin economy was powered by the transaction volume and value of international wealth movement. Running forward it'll be from e-commerce and store of wealth, and I'm skeptical if that'll be enough.
Beyond that, expatriation from the US is at an all-time high[3], and the rumor is that it's related to the adoption of Obama's progressive taxation schema.
[1] - http://en.wikipedia.org/wiki/Expatriation_tax#United_States
[2] - http://en.wikipedia.org/wiki/Ex-PATRIOT_Act
[3] - http://www.thefiscaltimes.com/Articles/2013/11/18/US-Taxpaye...
Thanks for the correction.
I don't think most people are aware of some of the crazy things Bitcoin could enable. Bitcoin is programmable money in a much deeper way than PayPal/Stripe/whatever APIs are "programmable money". It's a global distributed ledger with a scripting language [1] for performing a wide variety of transactions [2][3] with zero or minimal counterparty risk.
However, it's certainly possible we're shooting ourselves in the foot by growing too quickly and unleashing the wrath of banks and governments before any killer applications are built, but if these ideas are compelling enough they'll survive in some form.
1. https://en.bitcoin.it/wiki/Script
2. https://en.bitcoin.it/wiki/Contracts
3. https://www.youtube.com/watch?v=mD4L7xDNCmA
More reading for the curious:
https://en.bitcoin.it/wiki/Smart_Property
https://docs.google.com/document/d/1AnkP_cVZTCMLIzw4DvsW6M8Q...
https://en.wikipedia.org/wiki/Decentralized_Autonomous_Corpo...
https://github.com/DavidJohnstonCEO/DecentralizedApplication...
Isn't the viability of the distributed ledger predicated on the value of Bitcoin? Workers verify transactions because they get paid in something that they value. If the value of Bitcoin drops (say: government regulation), then the incentive to mine/verify goes away?
Assuming that happens and the miners go away, wouldn't the ledger be open to malicious attack?
There are other ways to "fund" the network security: https://en.bitcoin.it/wiki/Funding_network_security https://bitcointalk.org/index.php?topic=157141.msg1665332#ms... I don't know if these schemes would work if the value drops too low though.
Most of the time I think there are just too many variables to so confidently point to one as the cause.
So when I hear on the radio that the Dow went down because of xyz I just chuckle. If we were really so good at pinpointing cause and effect in the markets, the people doing so would shut up and make money.
Basically I think it is reasonable to assume that this news is the reason for the decline.
The idea of Bitcoin being illiquid strikes me as being quite ironic.
It's far easier to find causes than to predict details. For example, you know the numbers on some companies are going to be released at exactly 2:00pm, and then at 2:00pm related stocks move twice as much as they had in the previous week. You can't profit off of "80% chance of moving strongly up or down at this specific time", but you can make highly accurate claims about causes.
Sure you can, you buy a set of options which pay off if it moves high or low enough. The reason you can't, in practice, profit is that such opportunities will tend to have already been priced into the cost of those options. But not because there's no such thing as a strategy to profit off of volatility!
And then, there is the fact that you can make money off people coming late to the market. This is an old trick.
I think the most likely reason why BTCChina prices have reached parity with other exchanges is simply that the recent selloff has actually temporarily improved RMB liquidity in BTCChina accounts, since folks are stashing RMBs in their BTCChina accounts as they wait to jump back into the market.
...so despite the new Chinese government rules that should lower RMB liquidity, the markets seem to say that BTCChina RMB liquidity is actually pretty good for the time being.
This is how I understand it: people already have dollar denominated accounts with Mt Gox, either by selling BTC on Mt Gox or depositing money there. They want to get these dollars out, but since it takes so long for Mt Gox to process these transactions and complete the requests, people are buying BTC on Mt Gox and transferring them to other exchanges that can process the withdrawals in a quicker fashion. This is in exchange for a discount on the USD/BTC rate they will get, i.e. they will lose the premium offered by Mt Gox so that a dollar denominated withdrawal request will happen more quickly on another exchange. The net result is a higher demand for Mt Gox BTC offers, and the premium results.
Many people invest dollars into Bitcoin because they believe it will increase in dollar value.
If they exchange their Bitcoins for dollars at Mt Gox, they know they will have to wait to get the dollars. They believe that, while they are waiting, the value of Bitcoin will probably rise. So they demand the expected future value of their Bitcoins, not the present value.
Mt Gox is based in Japan, and very public about operations.
I'm going a bit off topic here, but one of the major weaknesses I see of Bitcoin are the exchanges. For the currency to survive, in the way it was intended, I think there needs to exist a decentralized exchange as secure as Bitcoin itself. If someone wants to work on this, shoot me an email.
This is an issue with USD (as dollar bills in your pocket or in a bank account) and MTGXUSD (as dollar units in a Mt Gox account). MTGXUSD are worth less than USD because of two factors; one is potential regulatory issues, and the other is that you are buying future dollars, which are cheaper than right now dollars.
Because MTGXUSD are cheaper than USD, you need more of them to buy BTC, and thus the price differential.
And corporations now, as well.
So, if we are to look at this situation honestly the only real conclusion to be made is that this is an act of legitimization on the part of the Chinese law-makers, and we can all just stop pretending that .btc are not here to stay, and be used, and .. compete on the global money markets.
What I really can only say, in the rush of it all, is that I hope we can finally end the hegemony of the Petro-dollar, and all those invested in its persistence .. for it has been a very vile instrument, and the time has come. Crypto-currency has the stage.
I'm not aware of anyone who said BTC was immune from regulation.
There just needs to be a few killer apps on TOR (drugs, gambling, whatever) and bitcoin will always have some value.
It'd have to look like a legitimate rumor, but this would work because speculators tend to easily spook (at least in other markets) and no one wants some anonymous internet person stealing all of their money.
Use mtgox since for the most part other exchanges follow gox.
1. Using half (or more) of your coins, sell out all the high bids you can at once. this will grow the gap between asks and bids.
2. at the same time, create an ask wall using the remainder of your coins at a penny above the highest bid you couldn't sell to. This will ensure that no transactions occur at a higher price than your artifically-created low.
3. auto-traders that haven't adjusted will eat away at this ask wall to some degree, which will make the buy and sell price basically identical.
4. Since all of the indicators look consistently bad, automated traders will adjust to this lower price, lowering their asks to below your wall to try to exit quickly. This is also when a lot of panicky weak hands will exit.
5. This is when you want to DoS the exchange. It's important to do this AFTER the price has adjusted, so that the outage creates more confusion and hysteria, but there is an overwhelming sense of a crash. If you can deface a site to report a wallet compromise, that's even better.
At this point, people should be desperate to get out at any price.
Counterparty risk is huge in the BTC world unfortunately.
To paraphrase a once great govenator.
The key to success is to buy when I sell, Sell when I buy, work hard and marry a Kennedy.
See the article [1] on the website of Xinhuanet [2].
[1] http://news.xinhuanet.com/fortune/2013-12/17/c_125874796.htm
She wasn't too concerned. Surprisingly she seems to really understand the disruptive nature of cryptocurrency.
She is a fashion designer, by the way, and I never really explained Bitcoin to her - she just bought in.
Disclaimer: She used to be some kind of Age of Empires II master nerd back in the days. Trust me - I never saw anybody playing that game like her. I was humbled...