Bitcoin Value Sinks After Chinese Exchange Move
nytimes.com
nytimes.com
Anyone who thought the Chinese government were going to ignore a mechanism that allowed people to bypass capital controls with impunity was pretty naive.
Bitcoin fanboys have classic tunnel vision - they're so enamoured of the libertarian ideal of an anonymous crypto-currency that's not controlled by any government, that they ignored all the practical, economic and legal challenges it would need to overcome before it could become a real currency.
It's a bit like the people who watched the moon landings on TV and believed that we'd have moonbases by the end of the 20th century. Technology needs time to develop and mature, and there typically needs to be a compelling commercial case for its adoption.
The technological principles that underpin Bitcoin will see more widespread adoption within the next few years but they'll be deployed within the pre-existing financial context, perhaps as a mechanism for OTC trading or to support real-time gross settlement in the wholesale markets. In the retail market, I envisage an M-Pesa-style digital payments/money-transfer solution that complements the the traditional banking and payments systems. We might see alternative currencies built on Bitcoin-style infrastructures but based on something that people value in a different way from dollars and cents (e.g. the rainforest).
But Bitcoin itself is too flawed from an economic perspective, too inefficient and too big a step to be able to function effectively as a currency within the current AML/sanctions-focused regulatory environment.
I am always amazed by the condescending tone of know it all speculators who think they've got it all figured it out. Labeling bitcoin enthusiasts as fanboys is a trite rhetorical tactic to marginalize their opinions, but what's really hilarious is that your tense (they ignored all challenges, an obvious falsehood btw) seems to imply that you've somehow definitively demonstrated that bitcoin is destined for failure. Guess what? Bitcoin was chugging along just fine before the Chinese hit the scene, in fact, black market merchants had no problem accepting bitcoin as their primary source of payment long before the financial world had even heard of bitcoin. I applaud your risky predictions though (bitcoin will fail, the price will drop if a government clamps down on bitcoin, bitcoin technology will be used in future financial systems), truly marked insight, you should recommend a reading list.
Anyway, I expect you to headline the inevitable "Bitcoin Once Again Breaks 1k" thread with a post linking to your comment here, explaining why you were full of shit... Though, I won't hold my breath since intelligent individuals like yourself will always find a reason to consider bitcoin a failure until its adopted as legal tender (something that the "fanboys" realize is completely unnecessary for the success of bitcoin).
As you point out, the terms 'fanboy', 'tunnel vision' and 'libertarian' can be tactics to market a particular opinion. Ad hominem arguments are always a good indication someone is making blaming statements. I'm personally enamored with the fact that cryptocurrencies instantiate trust at their core because trust is important to me. That's not necessarily a libertarian viewpoint, so clumping me in with a group of libertarians effectively blames me for something that I'm not guilty of. FWIW, I don't have a beef with Libertarians, and may be one for all I know.
BTW, making a coy remark about his 'intelligence' and speaking for his future actions are blaming statements in themselves. It isn't helping the conversation much by doing that.
I admit, that part of my response was intentionally provocative, though, just to clarify, I wasn't being sarcastic when I regarded him as intelligent, my intent was to highlight the fact that intelligent individuals like the GP who are convinced they can conclude the definitive future of bitcoin will continue to do so because their intelligence drives a hubris that less confident (i.e. intellectually honest) individuals lack. The people who are used to telling everyone how finance really works can't help but bash all the fanboys over the head with their intelligent conventional wisdom.
The adoption of p2p technology, a protocol or a network has less to do with the quality of the technology itself, and more with the size of the network. Couldn't there be a better social network than FB? A better snapchat? A better Twitter? A better protocol than http?
Besides, too flawed from an economic perspective? Too inefficient? This is the rhetorical equivalent of "Spray and Pray"..
The current regulatory environment will not just disappear but itself. Bitcoin might win, bitcoin might lose, but there will be blood.
Regardless, I hear you in that there challenges to be overcome to effect wide-spread adoption of this technology platform into the current financial markets. There is always a constant challenge in architecting, securing and operating financial networks. Innovation in these areas never stops, and it is unreasonable to assume we're going to adopt something long term that is insecure or outright broken. We are driven by trust, greed and fear, after all. I don't trust you and I think you are going to steal my money. I love my money, so I will take measures to protect it long-term.
Bitcoin is complex, and I've observed people having difficulty digesting the details on how it works. One thing of value that appears to be overlooked is the fact that Bitcoin is being secured by individuals (miners) putting power into the system. That power is used to compute the encryption used to secure the coins. Some have put the time to crack a single bitcoin key at 82 billion years.
The fact that Bitcoin is secured via power put into the system, currently around 7 quadrillion hashes per second, needs to be considered when discussing adoption trends. The value brought to this market by that computing power cannot be ignored.
It is, to put it succinctly, a platform of trust powered by the most massive compute engine humanity has ever built.
Comparing it to the notion of a "moon base" is extreme on multiple levels, I guess one of them being that the actual demand for such is clearly minimal where as Bitcoin's adoption continues.
Bitcoin being banned by someone somewhere was a wholly inevitable and arguably necessary outcome. The positive spin on this news is that Bitcoin is on the radar at all to even be banned by anyone to begin with.
Bitcoin is born liberated and will continue to, irrespective of governments giving their stance. What else would a 'fanboy' expect from established players?
But even China can't stop bitcoin from being used in China. They just made it harder, that's all.
Bitcoin keeps getting adopted, the infrastructure is getting built, better software is being written. Whether you like it or not, it's getting more popular, that's just a fact.
I predict it will take Western Union and Money Gram and many smaller money transferers out of business in a few years. I'm sort-of confident it will take a significant portion of Paypal's business as well.
It may someday replace more "developed nations"/consumer-facing stuff like PayPal, but that will be a slow, politicized process fought in the arena of public sentiment. It will spread like wildfire in the arenas where there is currently no good means of transfer.
Point being, you should assess the quality of your investment in years, not hours. And in regards to the Chinese government, allow me to quote Mahatma Gandhi:
> first they ignore you, then they laugh at you, then they fight you, then you win.
Government intervention is just one of a few significant black swans: blocksize changes, verification (i.e. mining) fragmentation (effectively doubles the money supply for each split), and SHA collision attacks becoming practical. None of this should ever happen, right?
However, this line should be clarified in every context:
> took out a student loan and bought in at $225.
In the US, this is generally _not OK_. To everyone else in the US, do not read this as a positive example. Do not use student loans for bitcoin or any other investment.
What can I use my federal student loan money for? You may use the money you receive only to pay for education expenses at the school that awarded your loan. Education expenses include such school charges as tuition, room and board, fees, books, supplies, equipment, dependent child care expenses, transportation, and rental or purchase of a personal computer. Talk to someone at the financial aid office at your school if you need more details. [1]
[1] https://studentaid.ed.gov/sites/default/files/your-federal-s...
(Of course you may have been one of the small percentage who took out an unregulated private loan, but the principles behind those are generally the same).
Update: I can't find a link to back this statement up and at least one UK Bank (Barclays) seems to encourage it. My evidence is therefore purely anecdotal — I remember it being noted in the terms at the time.
Too many people offering investment advice in hindsight round here.
Gandhi never said the "first they ignore you" thing. It's been traced back to a speech by a union activist in 1912 or so. Lots of previous discussion about this on HN.
http://www.telegraph.co.uk/finance/2773265/Billionaire-who-b...
Anyway this is ridiculous. People try to analyze an new phenomena with the old terminology. It doesn't work like that. You can't understand the change if you don't change your paradigm.
Bitcoin aspires to be a currency and is presented as one, at the same time as trying to boost adoption by presenting itself as a cannot fail investment (hence built-in depreciation, mining etc), so I think it's a fair question.
If I declare white pebbles currency, and that there are only 20 pebbles acceptable, and each year I'll throw one into the deep sea, I have an appreciating currency. What is missing in my pebble currency is confidence, an intangible and difficult thing to acquire, and an easy thing to lose.
If you want to hedge against USD depreciation, BTC is one option.
If you want a hedge against USD depreciation, given the huge volatility of Bitcoin, I'd say it's far worse than most other assets, or even most other currencies. A hedge against inflation should not be volatile, it is meant to reduce risk, and ideally it should have an intrinsic value or very predictable demand.
It should also be in a regulated market - I wonder which of these exchanges will go bust because of this crash? If they guarantee a price in USD for bitcoin to users and the price plummets straight afterward, or regulations mean they can't sell the coins, they're going to be in an awkward place. There are no guarantees that anyone who has money in bitcoin will ever be able to convert it out into another currency, because any of these companies could go bust and leave their customers with nothing. That's a very different situation from most other assets.
BitCoin is a new thing; it does not map well to preceding concepts, be it "asset" or "currency" or something else entirely.
In the case of the US, the Fed constantly adjusts the dollars in circulation to further their monetary policies (typically low inflation, with economic growth), while in the case of BitCoin, the amount in circulation is set by a mathematical curve that is deflationary in nature.
Analyzing it as a deflationary currency (which many people treat as an "investment", because it increases in value over time) is about right.
- I can file a police report if my dollars are stolen, and there is a non-trivial chance I could get them back.
- I can store dollars at an insured institution, with a high degree of confidence in retrieving them again. [1]
- I [get to | have to] pay my taxes in dollars.
In essence, for all of our lifetimes, "currency" has always meant "state currency", with all the good and bad that goes with it. Even when precious metals were the norm, states still tended to get involved (stamping the Emperor's face on certain coins and giving those coins preferential treatment).
While BTC meets the definition for currency in some ways, it's probably more practical in our current financial ecosystem to think of them as a highly fungible (and volatile) asset. (As with the stock market, no one should be putting all their life savings into crypto-coins.) As the ecosystem continues to grow, this may change.
[1] This might be the balancing factor to the deflationary issue, to the extent that it matters: that most people might end up keeping their hoard at an insured, well-secured BTC Bank, and paying a small steady percentage for the assurance that their whole pile doesn't disappear.
I'd agree my usage of the term 'hedge' isn't useful. But it is nice to have something that has appreciated so well over time, where my own currency has sucked.
I don't worry too much whether it succeeds or fails, but I assume if it succeeds it'll have to move through the hysteria and a trough of disillusionment to find some niche.
It also has a very large risk premium, which makes it inferior to other options for solely a long-term store of value.
>If you want to hedge against USD depreciation, BTC is one option.
Bitcoin is an imperfect hedge against U.S. dollar depreciation. There are valid reasons for investing in Bitcoin, but this should not be one of them.
Besides, so far, Bitcoin has been highly inflationary. In a bit more than a year, the number of bitcoins in circulation has doubled.
https://blockchain.info/charts/total-bitcoins?timespan=all&s...
Inflation and deflation are not solely functions of the supply of money. They are functions of the price of money, which is a function of both supply and demand. The price of goods, which have been reasonably stable in U.S. dollar terms, have fallen in terms of Bitcoin. Thus Bitcoin is presently deflationary, not inflationary.
But why would you want to? Inflation is bad if you have lots of money but no (prospects of) income. Retirees for instance. Most of you are in the opposite situation.
You can speculate in currency fluctuations in any currency, but to refer to a currency as an investment is a huge red flag for it as a currency, and for investment assets you should prefer slow appreciation over wild fluctuations and speculative moves.
Ever since Rich Dad, Poor Dad I've been careful to distinguish assets that bring income, and other forms of property and equity whose price is purely an illusion supported by speculators' predictions about other speculators' whims.
> Everything goes up in price, until it doesn't.
"The bleeding always stops."
Bitcoin is going to succeed because anecdotally you risked far more than was responsible on a winning gamble?
Prices don't just increase inexhaustibly. Bitcoin isn't going to 'win' if the only value it has is that people can wake up to find their investment multiplied overnight. These are the elements of a ponzi scheme, and you shouldn't argue for its success because of your kitschy miracle story.
Lending money to a company allows that company to invest, and increase their profits.
Buying BTC is nothing like that. It's speculation - hoping that the price will go up, nothing more.
The only way of regaining this control is by forcing all major companies to ban bit-coin.
You think the companies are happy about this they were making a very nice profit from the transactions.
Bitcoin is money with the ledger built into it. It's not for hiding wealth, but for tracking it. This is a market correction that had to take place.
People get confused right now because the ledger is more or less blank. It won't be. (As a slightly dystopian side note, BTC with very little history may become very very valuable.)
In the future, it is going to be preferable to pay for anything large with cryptocurrency. It's overkill to buy a coffee with Bitcoin. But a house, a car, maybe even rent? What better way to prove you own or have paid for something? The currency knows when and how it was used.
We currently live in a world where banks try to foreclose on homes that aren't even mortgaged. Bitcoin and the like will end that. But even more importantly, Bitcoin is about wealth protection. The average Joe will have very little of the deflationary income. But large banking institutions will.
No, it won't. The problem was never proof of payment. The problem in almost all cases was proving ownership (by the foreclosing bank) of the ownership of the mortgage/loan, which Bitcoin can't and won't solve because it's not something that can be put into the Bitcoin protocol or software. (The bank you take out a mortgage from is rarely the bank that you end up making payments to; the original bank usually sells your mortgage to another financial institution willing to accept the credit risk.)
But even more importantly, Bitcoin is about wealth protection. The average Joe will have very little of the deflationary income. But large banking institutions will.
Why is this a good thing? You've basically just said that the rich will just get richer and the average Joe will, in relative terms, will become even poorer (as prices increase to keep pace with the increasing wealth of the rich).
> BTC with very little history may become very very valuable.
Unpack this? I had thought that if you sent coins to a fresh wallet ID, it becomes effectively anonymous. (I've heard of some who generate a new public key for every transaction.)
Not really, you can see where the money came from, and assume the same owner (or a relationship between the owners).
To anonymize bitcoins you have to 'mix' them - take X bitcoins from N people, send them to a single address, then send X to new addresses for each of the N people. Because any persons bitcoins might end up going to someone else, you cannot assume it's the same person or a transaction any more.
Perhaps, but I think that's why some degree of drug site users.. according to my readings, prefer litecoins. (just not sure how important of a feature ltc is, but it seems to be at least quite important to some)
The value is in having exchanges with little history, and having viable altchains that people can buy into and sell out of.
Why would a virgin coin be more valuable than one that has passed through countless wallets? What is the advantage?
Certainly an amusing quote, given the extensive actions to stop the spread of such a non-threatening non-currency.
By "ban", I assume they mean "made illegal." The former of course being a euphemism for the latter. A couple questions come to my mind as such.... How will China enforce such a ban? Can China physically or technologically bar access to Bitcoin deposits?
Regardless of the Chinese government's ability to effectively enforce such a ban, the price of Bitcoin has taken a noticeable dive.
Don't judge on one day. Wait for a week, 10 days before making conclusions on the price of Bitcoin. Bitcoin has shown to be pretty resilient to news that were considered bad by the media. We'll see.
My conclusion is that it's pretty fucked up [1].
Nov 15 $US430
Nov 22 US$843
Nov 29 US$1137
Dec 6 US$552
Dec 13 US$869
Dec 18 US$584
Pick one of those dates before today and imagine saying "wait for a week ... before making conclusions on the price of Bitcoin".
> because Bitcoin can have as much as 30% variation in a given day
Hence, "pretty fucked up".
As parent said, with Bitcoin you have to look at things in a different way since it works in a very different way than anything else we've ever seen.
No major currency suffers from 30% intra-day volatility against other currencies. It would make pricing goods and services essentially impossible. Who would care about saving up to 5% on credit card fees if they're suffering 30% arbitrage losses because they set/update their prices at the wrong time of day?
If every possible outcome confirms your hypothesis, you are not considering the evidence properly. If China hadn't moved against Bitcoin, would you think that would make Bitcoin a less attractive speculation?
The comment you responded to was a bit "buy buy buy" but the sentiment is just another way of saying "first they ignore you, then they laugh at you, then they fight you, then you win"
Yes. Didn't I just say that?
I can calculate the movement of the stars, but not the madness of men Sir Isaac Newton
Probably a great time to buy.
Why?
He or others like him may not have sold off all of their coins and need dumb money to keep the price afloat just a little longer...
If it were a great time to buy, he would have. Follow the actions and not the words in markets like this.
1) if a disruptive tech has plenty of personal intrigue and 2) plenty of brilliant people herald it
then buy the crash.
1. http://www.businessinsider.com/williams-bitcoin-meltdown-10-...
Will we see the BT under 200$?
Bitcoins, I as an outsider have to say that many people will be tempted to buy because of the low price. This low price is being advertised by lots of people as a reason to buy, probably trying to mask the news of China not allowing the business. What big economy has accepted bitcoin as a currency? Edit: What reason is there to be optimistic about the bitcoins.
$200 is certainly possible, if not likely.