First Bitcoin "Depression" Hits(dailytech.com)
dailytech.com
First Bitcoin "Depression" Hits
http://www.dailytech.com/article.aspx?newsid=21877
14 comments
It does undermine it as a useful currency though. Can't set prices in bitcoin, can't safely hold money in bitcoin, can't safely sign future contracts in bitcoin.
I'm not sure how much of that was going on in the first place, but isn't it the goal?
I'm not sure how much of that was going on in the first place, but isn't it the goal?
It's volatile, just like any similarly-tiny market. You can't set prices in moon rocks, because a single round-trip to the moon would destabilize the entire economy.
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.
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.
I think the OP was referring to the Dwolla API issues that MtGox was having. With Dwolla being their paypal-alternative, people got kind of spooked when suddenly they couldn't move money in and out of the market earlier this week and no answers were immediately available.
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.
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.
That could very well be the case, thanks! I was hunting around for possible causes, but wasn't having much luck.
but there will always be winners and losers in any economic game
I believe you mean to say 'financial' here, in place of economic.
I believe you mean to say 'financial' here, in place of economic.
I suppose, yeah. I was thinking that you're essentially betting on the Bitcoin economy if you buy them.
It's worth recognizing that buying USD is also a bet highly correlated to the United States economy.
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."
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."
There is a lot of assumption going on in this article.
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.
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.
I am inclined to think that the fundamentals of bitcoin are very good, it'll be interesting to see how the price rebounds after this correction, I tend to think with all the trolls happening in the forum that some big players want in big time.
Can't believe you're calling other people trolls after your comment to a previous Bitcoin post:
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.
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.
It doesn't feel like a depression when it was preceded by an incredible rally. One month ago I sold my first BitCoins for 2.7€. Four days ago I sold some for 20€. When I got into mining, I thought even 1€ was incredibly high. Who cares if they went down from 20€ a little - the exchange rate is still incredible.
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.
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.
I sold my 5 BTC at $30/coin, and walked with $149.96 after fees. It certainly felt like a bubble, and I'm glad I got out when I did, even if it was only for spare change in the scheme of things.
Yes, it felt like a bubble. Then again, I don't really know. You never really know with investing, I suppose. It felt like a bubble when I sold for 7€, and now with hindsight 7€ was very low...
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 :-)
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 :-)
Heh. How many BTC do you have?
I have about 350 left - bought a miner in March...
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.
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.
Which miner did you buy? And how much did you pay for her?
I bought an Acer gaming PC off ebay with an ATI HD5970 graphics card for 800€ - but the same offer was available for 700€, I just missed it.
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.
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.
Take Silk Road, for example -- the topic of a recent Gawker piece. An IP accesses this site, which is known for selling narcotics illegal in the U.S. If this is a user's direct IP, anyone who can sniff the traffic of the site can trace that user back to their home address, assuming cooperation of the internet service provider.
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.
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.
Yes, but Bitcoin isn't necessarily anonymous:
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.
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.
I suspect #4 Getting Money In or Out is the only one that matters. There have been problems getting USD into Mt.Gox for most of the week. Now with the weekend upon us the trickle of new funds has become a drip. There are no shortage of people in the forums looking to buy bitcoin with paypal, trying to get in before all the bank wires on Monday. I expect it will be back up to around 20 USD by Tuesday. Regardless of the cause, big swings like this don't exactly help it's cause in becoming a widely used currency.
The exchange rate stopped going up shortly after The Silk Road closed to new users. It started dropping soon after. TSR was the most compelling and publicized use of bitcoins, and I expect that if the site re-opens there'll be another round of publicity and bitcoins will rally.
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.
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.
I really doubt TSR was a significant factor in this.
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.
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 made a quick and easy way to check the latest price:
http://bitcoinprices.org/
And I made a price comparison chart with fiat currency conversion: http://fnoose.com/bitcoin/arbitrage/
As far as I understand bitcoin (very very little) is mostly being bought/mined by people who like the idea as an investment/experiment. That makes it a kind of goofy commodity at the moment.
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?
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?
Basically, it's great for the black market. For the US, that means primarily drugs and gambling. That's why the price shot up after the Wired article about Silk Road: A whole bunch of people wanted to get Bitcoins to buy drugs online. In some countries the black market is even more important, because it's the only way to get certain necessities. The fact that bitcoins are being used as an investment vehicle right now is depressing, since the world desperately needs a form of digital cash.
It's much more convenient to use than existing methods of money transfer. Once you already have some BTC, that is - getting BTC might be a bit too cumbersome at the moment.
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.
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.
Do you think a bitcoin based payment processor where you can pay with bitcoin or with credit card (processor converts to bitcoin behind the scenes) would have any advantage? Would it be enough of an advantage to incentivise bitcoin use (eg avoiding conversion costs)?
You would have to offer a discount for paying with bitcoins for this to work. I know a lot of merchants (in real life, not online) that offer small discounts to people who use cash so that they don't have to pay credit card transaction 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.
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 point (in my mind) is to make it entirely bitcoin from the merchant perspective. They can set prices in bitcoin, buy stock in bitcoin, etc.
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.
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.
Maybe a useful service would look like this: send BTC to any address, pay by credit card. That way shops could go BitCoin only, and people who don't want to bother setting up a bitcoin wallet could simply use that service to pay by credit card.
The question then becomes 'why would/ what would make merchants want this?'
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.
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.
For example because you could accept BitCoin right now. No hassles with trying to get some payment provider to accept you as a legitimate business. Fees might be lower, too.
I could if I wanted bitcoin and if my customers had bitcoin. Realistically though it's going to amount to my customers buying bitcoin to pay me and then me converting immediately back into hard currency. So, we'd both pick up some fees along the way. Prices would nominally be set in some other currency, probably the same currency as my expenses.
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.
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.
I suppose making it easier to user bitcoin would incentivise it's use. At the moment accepting BitCoin payments probably has the advantage that lots of people are eager to spend BTC on real things. That effect might not last, though.
> A couple of seconds later squarewear knows I transferred the BTC and all is done.
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?
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?
I am not 100% sure, to be honest. I think there is a difference between getting to know the intent ("a payment has been triggered") and the actual confirmation (kind of like showing a printout of the money wire). The intent can spread arbitrarily fast through the network ("A has triggered a payment to B"), but only the miners can compute the actual confirmation, which takes longer. As long as the miners haven't confirmed it (by computing a block), there is the risk of double spending. I suppose those merchants simply accept that risk. They don't have to actually ship before they get the real confirmation anyway.
The transaction show up immediately as 'pending' and will get 'confirmed' after about 10 minutes. Squareware can choose to conditionally accept the 'pending' transaction on the spot because they can simply wait for the transaction to be confirmed before shipping out your stuff.
"a major improvement would be for Bitcoin exchanges to implement mandatory market closures if the currency value dropped below a threshold"
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?
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?
A depression doesn't mean a sudden drop in market prices. It means persistent GDP contraction, which has nothing to do with the value of a currency.
The drop is also not the first bitcoin has had. It's been highly volatile since the beginning.
This is just sensationalism.
The drop is also not the first bitcoin has had. It's been highly volatile since the beginning.
This is just sensationalism.
I guess these fluctuations will go on until there are many more interfaces between bitcoin and the rest of the world (ie places where you can earn and spend bitcoins).
The money is only 'lost' if A) they bought BTC at > $19 B) they did A AND sold today, or C) the price never recovers to $28 USD.
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.
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.
FUD. Pic related: http://bitcoinweekly.com/articles/comic-reaction-after-drama...
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.