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The Bitcoin Crash

bbc.co.uk

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Re: The Bitcoin Crash

#41

Post by pyre »

pbhjpbhj wrote: post #24
sltkr wrote: post #7

Earlier quoted context omitted.

Note that there are at least two people involved (excluding Mt Gox): a hacker that managed to gain access to a large amount of bitcoins and started selling them all, and a person that profited of the low price by placing a large buy order at 1.01¢ per coin (so as to outbid sellers at 1¢ but still pay a very low price). Kevin/toasty admitted to be the buyer, but he is not the hacker (at least, he claims he isn't and M…

> but there is no proof of that whatsoever There is no independent proof of Mt.Gox's claim either is there?

Well, if there's no proof either way, then it makes sense for the BBC to 'take sides' and try to pick a winner, right?

Re: The Bitcoin Crash

#42

Post by illumin8 »

mathly wrote: post #22
illumin8 wrote: post #17

Bitcoin will recover, but right now it is going through a liquidity crisis: Only a small percentage of BTC users were using Tradehill, a competitive BTC exchange. People have rushed to create accounts there, however it takes a few days to transfer money in, so right now there are more sellers than buyers, causing prices to go lower. In addition, apparently some people have their money tied up in unreachable MtGox acc…

Maybe we shouldn't be so trusting of Bitcoin Exchanges? http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthles...

Interesting article. While it is entirely possible to do this, professional traders will soon move in and arbitrage any price differences between exchanges.

As competition increases, amateur exchanges that manipulate the price will suffer the consequences, for example, overpaying on the buy side because they've artificially inflated the price. Or traders will just move to another exchange if the spread is too high between bid and ask.

Re: The Bitcoin Crash

#43

Post by chalst »

illumin8 wrote: post #17

Bitcoin will recover, but right now it is going through a liquidity crisis: Only a small percentage of BTC users were using Tradehill, a competitive BTC exchange. People have rushed to create accounts there, however it takes a few days to transfer money in, so right now there are more sellers than buyers, causing prices to go lower. In addition, apparently some people have their money tied up in unreachable MtGox acc…

It looks very fishy, like MtGox is intentionally delaying access to people's accounts in order to prevent a run on the exchange.

Such a move, if it is what Mt Gox is doing, is completely legitimate. If they are indeed bankrupt, then an orderly winding down is fairer; if they could recover their business, then this avoids needless value destruction.

Re: The Bitcoin Crash

#44

Post by swishercutter »

lysol wrote: post #18
gst wrote: post #15

Earlier quoted context omitted.

Why should a panic require intervention? If somebody wants to sell his Bitcoins way below the market price - why stop him?

Circuit breakers give the exchange a chance to cool off and think things over. It isn't really intervention. It's just a halt to trades and they could take their BTC to Tradehill if they really feel like selling. Bitcoin fans like to pretend that all aspects of it should be unregulated, but when you take a decentralized currency and then place it in a centralized exchange, that mentality is no longer applicable and y…

In this case circuit breakers were not needed...it crashed down to .01 and was on its way to recovering (back up to $14) within minutes before the exchange was shut down...all this situation did for me was steel my resolve that it can handle a 2% market selloff at virtually zero.

I was in the forums and watching the Mt.Gox ticker while the "crash" happened.

Re: The Bitcoin Crash

#45

Post by wiredfool »

danssig wrote: post #38
thanasop wrote: post #20

Earlier quoted context omitted.

The amount sold was over 500000 BTC - more that all estimated deposits on MtGox. The likely explanation is that these were just virtual BTCs added through SQL injection. The alternatives are that a single person was keeping that much on an exchange rumored to be insecure and used insecure password (easily cracked from leaked md5 hashes), or the person decided to sell half his BTC for $0.01 - an extra $2500 in additio…

>The amount sold was over 500000 BTC Source? I hope you're not quoting the guy from the "I'm the one who bought them" forum thread who accidentally add all numbers including dates to determine how many BTC were traded. He was almost instantly debunked.

And he came up with 51 million.

500KBTC is a pretty solid number, or at least, it's as solid as anything else that the public's been told.

Re: The Bitcoin Crash

#46

Post by lysol »

swishercutter wrote: post #44
lysol wrote: post #18

Earlier quoted context omitted.

Circuit breakers give the exchange a chance to cool off and think things over. It isn't really intervention. It's just a halt to trades and they could take their BTC to Tradehill if they really feel like selling. Bitcoin fans like to pretend that all aspects of it should be unregulated, but when you take a decentralized currency and then place it in a centralized exchange, that mentality is no longer applicable and y…

In this case circuit breakers were not needed...it crashed down to .01 and was on its way to recovering (back up to $14) within minutes before the exchange was shut down...all this situation did for me was steel my resolve that it can handle a 2% market selloff at virtually zero. I was in the forums and watching the Mt.Gox ticker while the "crash" happened.

If it wasn't a stolen balance then I would agree with you. A massive sell-off of BTC could've happened at any time. But in terms of self-preservation it would've been in MtGox's best interest to have a circuit breaker. I'm contradicting myself a little here, but I've been having a lot of cognitive dissonance over Bitcoin anyway :)

Re: The Bitcoin Crash

#47

Post by swishercutter »

lysol wrote: post #46
swishercutter wrote: post #44

Earlier quoted context omitted.

In this case circuit breakers were not needed...it crashed down to .01 and was on its way to recovering (back up to $14) within minutes before the exchange was shut down...all this situation did for me was steel my resolve that it can handle a 2% market selloff at virtually zero. I was in the forums and watching the Mt.Gox ticker while the "crash" happened.

If it wasn't a stolen balance then I would agree with you. A massive sell-off of BTC could've happened at any time. But in terms of self-preservation it would've been in MtGox's best interest to have a circuit breaker. I'm contradicting myself a little here, but I've been having a lot of cognitive dissonance over Bitcoin anyway :)

Exactly...had it been a real selloff by some crazy early adopter the market would have absorbed it and recovered. Circuit breakers prevent mass panic sells...I guess a lot of those panic sells were prevented by server load (inability to log in fast enough).

I doubt the real stock market could take something like what happened without serious issues remember 500k/~6M were exchanged in a matter of minutes at a rate that was obviously far below market value.

I personally doubt Mt.Gox had any bad intentions and I personally do not think they are lying now...but then again I had no money in the exchange at the time. Also, I am aware Mt.Gox is (was) the biggest exchange out there but there are many others...they are not the only fish...just the biggest, for some reason news articles typically imply they were the only option for BTC exchange.

If Bitcoin failed tomorrow I would still be glad to have been a part of it, history is being made as we speak...even if history just writes it off as a failure.

Re: The Bitcoin Crash

#48

Post by personalcompute »

perfunctory wrote: post #4
wurf wrote: post #3

that's only half the truth, here's the story of the so called "fraudster": http://forum.bitcoin.org/index.php?topic=20207.0

BBC story seem to differ from the one offered by toasty. We might never learn what actually happened.

BBC has no story, they are parroting MT Gox's reports.

Re: The Bitcoin Crash

#49

Post by swishercutter »

lifty wrote: post #40
IsaacL wrote: post #25

Earlier quoted context omitted.

That raises an interesting point. The nature of Bitcoin is supposed to prevent things like fractional reserve banking, since the nature of the system means you can't give people BTC you don't have. It's impossible to create bitcoins in any other way except mining. However, if people are making BTC transactions through a centralized exchange such as Mt. Gox, they are in effect moving numbers around in MtGox's database…

Indeed, if people would keep the money inside the exchange all the time, they would be able to artificially create more bitcoins in their system without being noticed. In case all people would try to take all their money out, the exchange would be left with a deficit of money, practically not being able to return it to their users. In anyway, it would be risky for an exchange to create more money than they actually h…

This is impossible...every bitcoin has to be verified every time it is transferred...there is tracking no matter what anyone says.

http://blockexplorer.com/

You can see any and all transactions.

Any bitcoin in/out of Mt.Gox has to be verified by the network...a "fake" bitcoin would never get out and it would not benefit Mt.Gox to transfer fake BTC around internally.

A bitcoin cannot be counterfeited easily...hence the beauty of the system.

People can claim that there was never 500k bitcoin in Mt.Gox but the fact still remains there was a transfer of 500k just days before this incident that was discussed as possibly being Mt.Gox moving their internal wallet around.

Now if someone controlled over 50% of the network hashing capability that would be a different story...possibly they could inject false info or something like that (I admit I know very little about this part, just briefly reviewed it enough to know its bad) but that's why you see postings in the forums telling people to switch "guilds" to spread things out. Deepbit approached 50% last month and there was a mass exodus. Most of the people involved in this know the risks and work very hard to self regulate.

Re: The Bitcoin Crash

#50

Post by gwern »

smbwrs wrote: post #31
gwern wrote: post #29

Earlier quoted context omitted.

There was a comment on the Silk Road forums (in the context of replying to someone wondering whether buying from a seller with 0 reviews was very risky or not) to the effect that the Gawker article had caused SR to jump from a few hundred accounts to over 9000. A decent number, granted, but likely most of them have not engaged in any transactions and never will. On the other hand, another poster mentioned that there…

"...from a few hundred accounts to over 9000." I see what you did there.

No, I was quite serious. I just checked, and the most recent account IDs are actually now in the 15,000 and 16,000s.

Seriously people, sometimes 'over 9000' is just a literal statement of truth and not a meme!

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