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Bitcoin falls from $266

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Re: Bitcoin falls from $266

#321

Post by Jtsummers »

cs702 wrote: post #135

Evidently, many hoarders/speculators decided to cash out at once -- much like the audience in a movie theater would try to go through the exit door at the same time if someone were to yell "fire!" The naive souls who recently bought bitcoins to make a 'quick buck' are in for a rude surprise. In the short run, no one knows how Bitcoin's price will fluctuate. In the long run, however, if Bitcoin continues to work as in…

Thoughts on your essay:

Fractional reserve banking - if it's merely backed in BTC then what's the point of bitcoin? It entirely defeats the system as people will be back to fiat currency.

Early adopters and clever nation states have the opportunity to totally turn the world upside down in a BTC backed future. They should have a significant percentage of all existing (as it's finite) BTC which would distort their actual worth. A clever North Korea - estimated GDP of $40 billion, and about $4 billion each in exports and imports - could hold an incredible amount of BTC buying power. Why would any other nation want to acknowledge them? Similarly, they'd be holding onto a financial nuclear bomb if they held enough BTC. They'd be able to almost singlehandedly alter the value (in purchasing power) on a whim with a significant enough percentage.

---

Next, you focus heavily on hyperinflation, but never once seemed to mention deflation. Or the fact that under a scenario like above, hyperinflation is almost feasible as suddenly a large amount of BTC could reenter the market. Long term it would get absorbed, but short term impacts could be severe.

Re: Bitcoin falls from $266

#322

Post by dllthomas »

gph wrote: post #310
dllthomas wrote: post #301

Earlier quoted context omitted.

> 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 inste…

You read me as being more precise than I'd meant it. But it's basic economics that competition drives the cost down toward the cost of production (including labor cost and opportunity cost), and there's nothing in bitcoins that's preventing people from competing.

And regardless, there's absolutely no conceptual reason cost of production would represent any kind of floor.

Re: Bitcoin falls from $266

#323

Post by lwat »

tommorris wrote: post #243
eksith wrote: post #146

BTC crashed primarily because the market suddenly got flooded by Bitcoinbillionaire : http://arstechnica.com/business/2013/04/bitcoin-crashes-losi... This bares repeating... The value of BTC is in the nature of the transaction; not the currency itself. People have turned BTC into a commodity instead of actually bloody spending it. Their old fashioned thinking still ties it to traditional fiat like a smoker trying to…

> BTC crashed primarily because the market suddenly got flooded by Bitcoinbillionaire From the Ars Technica link: > At the moment, no evidence links the currency's plunge with this random reddit charity. I'm going with Ars on this. $12,000 to 12 people on Reddit isn't enough to bring the market tumbling down.

Bitcoinbillionaire supposedly had waaaay more than $12k in Bitcoins. That was just the bitcoins he gave away for nothing. He supposedly had millions worth, if he sold a large chunk of that he could easily crash the price all on his own.

Re: Bitcoin falls from $266

#324

Post by dllthomas »

Jtsummers wrote: post #311
dllthomas wrote: post #301

Earlier quoted context omitted.

> 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…

There's also the cost of setting it all up, the time in learning the tech involved or hiring those who do. If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side. The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market). The upper bound is essentially nonexistent. If I…

> If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side.

"Cost of production", in an economic sense, includes opportunity cost - that is, the amount of money I could be making if I did something else with the time instead, which can be more or less taken to mean a reasonable accounting "profit".

Edit: Also, I may sell it to you at a loss because I can't do anything better with it, if the price fell since I produced it.

> The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market).

Yes, if the price of bitcoins falls below the cost of producing them, more won't be produced, but that won't actually prevent the price from falling further.

Re: Bitcoin falls from $266

#325

Post by mrb »

coldtea wrote: post #211
cs702 wrote: post #135

Evidently, many hoarders/speculators decided to cash out at once -- much like the audience in a movie theater would try to go through the exit door at the same time if someone were to yell "fire!" The naive souls who recently bought bitcoins to make a 'quick buck' are in for a rude surprise. In the short run, no one knows how Bitcoin's price will fluctuate. In the long run, however, if Bitcoin continues to work as in…

It's until one-two major governments decides to make it illegal to deal in bit-coins that it's price will drop to zero. It doesn't matter if they can't enforce it 100% (or even 1%). What matters is that it will kill almost all opportunities to use it as regular money for legitimate purchases by major companies etc in the future. And that it could also land your ass in jail (with ISP monitoring and such being what it…

"It's until one-two major governments decides to make it illegal to deal in bit-coins..."

I don't know about other governments, but I doubt the US will ever declare Bitcoin illegal (though I am told to never say never). Supporting my viewpoint, the US Treasury Department, through FinCEN, has recently tacitly approved Bitcoin: http://www.businessinsider.com/is-bitcoin-legal-2013-4

I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc), rather than banning it because the technology is used by a minority of users for illegal activity.

"For one, because they don't like money systems they can not control"

This is a broken argument. The US does not control the Euro, or Yen, etc, yet they do not make it illegal to trade in Euros/Yens within the borders.

Re: Bitcoin falls from $266

#326

Post by maxerickson »

Jtsummers wrote: post #311
dllthomas wrote: post #301

Earlier quoted context omitted.

> 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…

There's also the cost of setting it all up, the time in learning the tech involved or hiring those who do. If it cost you $X to produce, why would you sell it to me for less than $X? You'd be losing money on the production side. The lower bound ought to be at least the cost to the miner that produced the new bitcoin (when they try and sell it or use it in the market). The upper bound is essentially nonexistent. If I…

There isn't any ought to be for the lower bound. (In a successful bitcoin world) There is eventually going to be a clear relationship between the cost of mining and the reward available, but if some miner switches to mining his own variety of digital money, we don't suddenly owe him something for the effort.

If we end up with a very competitive market for using cryptography to clear digital transactions, miners might well face a situation where it is barely worth it to burn electricity.

Re: Bitcoin falls from $266

#327

Post by muyuu »

ghshephard wrote: post #133
wting wrote: post #17

I'm interested in the price of Bitcoin, but we don't need these daily submissions. If you're interested in following the price, I suggest these links: - https://bitcoinity.org/markets - http://bitcoincharts.com/charts/mtgoxUSD - http://bitcoin.clarkmoody.com/ If you're interested in talking about the price, try #bitcoin-pricetalk on Freenode.

This is HUGE news on Bitcoin - nothing like this has ever happened in it's history. Market went from $250 to $110 in 5 hours. MtGox was down for 30 minutes today. Trading lag was 600 seconds for orders placed at market prices. April 10th, 2013 may be the day that will be remember for the next 20 years as the day that Bitcoin crashed and either (A) never recovered or (B) kept progressing after an incredible Blip. Defi…

Bitcoin has been through worse than this at least twice.

Re: Bitcoin falls from $266

#328

Post by DGrutt »

dllthomas wrote: post #283
EliRivers wrote: post #275

Earlier quoted context omitted.

A vast number of major governments have made it illegal to trade in, for example, heroin. Just making something illegal doesn't necessarily stop trade.

I don't think the users of bitcoin are quite as committed, though.

I think a lot of them are the same people.

Re: Bitcoin falls from $266

#330

Post by drcross »

wcoenen wrote: post #201
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…

> 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 bitcointalk forums and /r/bitcoin are full of paranoia like this. After months of stress trying to divine market patterns, people see market manipulation and conspiracies everywhere. The simple truth is that there was an agressive bubble. The doubling per…

The person who announced the implementation date of a security change should be fired on the spot. This is security 101.
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