Bitcoin falls from $266 • Hacker News Board

Re: Bitcoin falls from $266

#301

Post by dllthomas » Wed, Apr 10, 2013, 10:37 PM UTC

gph wrote: post #287

andrewcooke wrote: post #221

Earlier quoted context omitted.

no, because throwing electrons at turds doesn't generate currency. in contrast, throwing electrons at a chip does generate bitcoins. that's the relationship being alluded to: there's the possibility of arbitrage between electricity (compute cycles) and currency.

You explained exactly what the intrinsic value of the currency is: the usefulness of the currency itself. BTCs have value over turds for use as a currency for many obvious reasons. The amount of electricity it takes to create that currency can perhaps be seen as a price floor, which is perhaps corollary to the intrinsic value, but is not the intrinsic value itself. So if something improbable or drastic happened tomor…

> The amount of electricity it takes to create that currency can perhaps be seen as a price floor, which is perhaps corollary to the intrinsic value, but is not the intrinsic value itself.

Cost of production should be a price ceiling, not floor: if I can make it for $X, why would I buy it for $Y >> $X?

Edited: To hopefully head off further misunderstandings, by "should" here I mean "it makes the most sense to expect" - not any ethical imperative - and I'm speaking in broad terms, in the long run.

Re: Bitcoin falls from $266

#302

Post by sliverstorm » Wed, Apr 10, 2013, 10:39 PM UTC

baddox wrote: post #265

sliverstorm wrote: post #181

Earlier quoted context omitted.

Not sure you can consider that an intrinsic value. I could be wrong, but my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero. The bitcoin protocol does you no good if the market value of a bitcoin is zero. You do present an interesting conundrum though.

> my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero That seems like a fairly artificial mental exercise. Why would market value be zero if intrinsic value is greater than zero? I suppose the only situations would be if a good has a unique property that can provide utility to you but no one else, like a food that for some reason only provides nutrients for…

I think the real problem is with the metaphysical implications inherent in the word "intrinsic."

There it is, folks. We aren't talking about a simple concept, we are talking about the metaphysical and the deeper implications of words. What is a "word", anyway? Let's take a moment to consider.

Re: Bitcoin falls from $266

#303

Post by sliverstorm » Wed, Apr 10, 2013, 10:40 PM UTC

icebraining wrote: post #267

sliverstorm wrote: post #59

Earlier quoted context omitted.

The ability to sell an item for x USD is not one of the "things" you can do with it that contribute to intrinsic value. Let's put it a different way; if the market value for a bitcoin was $0, what could you do with it? Compare that to an apple. If the market value for an apple was $0, you could eat it. Thus (unless someone has a clever use for bitcoins outside of currency) an apple has greater intrinsic value than a…

I'd say that's use-value. Intrinsic implies it's not relative to each person, which clearly isn't true in that case (e.g., I could be allergic to apples, then the value would be nil to me).

Fine, not water. Apples. Are you allergic to water?

Re: Bitcoin falls from $266

#304

Post by eric970 » Wed, Apr 10, 2013, 10:46 PM UTC

I'm sure it's been stated already... And well, I'm no Bitcoin fanboy, but didn't the price just go back up to what it was 2 days ago? That hardly sounds like a "crash" to me.

Re: Bitcoin falls from $266

#305

Post by bdr » Wed, Apr 10, 2013, 10:49 PM UTC

brazzy wrote: post #276

bdr wrote: post #231

Earlier quoted context omitted.

> paranoia MtGox has said they were subject to DDoS attacks: https://twitter.com/MagicalTux/status/317423311174909954 > If you looked at the log plot[2], it still looked exponential! Trying to divine future price movement from looking at a graph has been proven definitively, repeatedly to be foolish.

Divining that a price that is rising in a superexponential manner will be going down sometime soon is one of the least fooling things one can do when looking at a graph.

You are empirically wrong. Please, quantify your idea and go backtest it on the stock market.

The efficient-market hypothesis does not have an asterisk excluding cryptocurrencies.

Re: Bitcoin falls from $266

#306

Post by dllthomas » Wed, Apr 10, 2013, 10:49 PM UTC

RockyMcNuts wrote: post #294

dia80 wrote: post #169

Earlier quoted context omitted.

On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic. The attackers unload their bitcoin before the price gets smashed and presumably buy it all back again from frightened speculators. If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it! On another note, mtgox.com the main…

In the days before computers, believe it or not, price reporting often ran behind. In the 68 'paperwork crisis' the NYSE went to a four-day trading week for a while to give back offices time to catch up. Capitalism survived.

... but was that capitalism "as we know it"?

Though, to be fair, I don't have an answer myself. Many things have changed, many haven't; it depends which bits you care about how much...

Re: Bitcoin falls from $266

#307

Post by codeulike » Wed, Apr 10, 2013, 10:51 PM UTC

mathattack wrote: post #258

Here is the thing I can't get around... If Bitcoin is open source, what's stopping someone from setting up a competing currency? Perhaps it could have the promise of a more optimal growth mechanism over time, or some other feature. Once it's in use, the value of Bitcoin drops quickly, no? And what if there are many Bitcoin-like currencies?

Because a currency is basically a _convention_ within a _community_. Bitcoin has a _community_, whereas an arbitrarily cryptocurrency launched next week probably wont have, unless a lot of groundwork is done first.

Re: Bitcoin falls from $266

#308

Post by mikeash » Wed, Apr 10, 2013, 10:53 PM UTC

epscylonb wrote: post #281

mikeash wrote: post #123

Earlier quoted context omitted.

Arbitrage here implies the ability to move money in or out of the country using ways other than bitcoin.

No it doesn't if you take your profits in bitcoin you can move them freely between exchanges to a friendly local jurisdiction.

There needs to be at least two things to exchange.

Let's assume that bitcoin is the only way to move money in or out of the country. Let's further assume that a purported arbitrage opportunity arises: The hypothetical Cypriot bitcoin exchange is selling bitcoins for 200EUR, while other exchanges are selling them for 100EUR. So you:

Buy bitcoins on other exchanges for 100EUR each. Sell those bitcoins on the Cypriot bitcoin exchange for 200EUR each. You've now doubled your money.

Except your money is now trapped in Cyprus. You can't get it out directly. The only way to get it out is to use bitcoins. Because you can't move the money directly, the only way to convert your Cypriot euros into bitcoins is to buy them on the local exchange, for 200EUR each. If you do that, then you're back where you started, minus whatever transaction fees you incurred.

For arbitrage to equalize exchange rates across exchanges, you need to be able to move both currencies involved. If you disagree, then please outline your procedure for how you'd make money in the scenario given.

Re: Bitcoin falls from $266

#309

Post by jessriedel » Wed, Apr 10, 2013, 10:55 PM UTC

encoderer wrote: post #292

jessriedel wrote: post #284

Earlier quoted context omitted.

First, I think the interesting question is just about fiat currencies, not the US in particular. The global reserve currency aspect is a secondary effect. Let's concentrate on a generic fiat currency issued by a government. So you're saying that "full faith and credit" just means "The gov't promises not to crazily inflate the money by printing lots of it". Fine. (That doesn't explain what process determines the stree…

No, you don't have to have debt to have good credit.

It sounds like you are suggesting that fiat currency functions like debt, but I've never understood this claim.

Re: Bitcoin falls from $266

#310

Post by gph » Wed, Apr 10, 2013, 11:00 PM UTC

dllthomas wrote: post #301

gph wrote: post #287

Earlier quoted context omitted.

You explained exactly what the intrinsic value of the currency is: the usefulness of the currency itself. BTCs have value over turds for use as a currency for many obvious reasons. The amount of electricity it takes to create that currency can perhaps be seen as a price floor, which is perhaps corollary to the intrinsic value, but is not the intrinsic value itself. So if something improbable or drastic happened tomor…

> The amount of electricity it takes to create that currency can perhaps be seen as a price floor, which is perhaps corollary to the intrinsic value, but is not the intrinsic value itself. Cost of production should be a price ceiling , not floor: if I can make it for $X, why would I buy it for $Y >> $X? Edited: To hopefully head off further misunderstandings, by "should" here I mean "it makes the most sense to expect…

Because not everyone is able to hit the same Cost of Production, or wants to put down the upfront investment in equipment, or has the technical know how, etc. If the cost of production was the price ceiling why would anyone start producing? They'd just break even at best.

Besides people buy things for $Y >> $X everyday simply for convenience. You could go buy ingredients and make a sandwich for $X dollars, but instead you go to the food truck and buy one for $Y dollars because it's convenient. It's not like food truck guy is selling his product at cost.