Value of Bitcoin "Crashes"

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Posted by ryuzaki0 on Wednesday October 19, 2011 @01:36AM from the smells-like-real-currency dept.

souravzzz writes with an update on the state of Bitcoin. Quoting the Ars Technica article: "Bitcoin, the world's first peer-to-peer digital currency, fell below $3 on Monday. That represents a 90 percent fall since the currency hit its peak in early June." That's still three times its value in April 2011.

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Bitcoin by TechLA · 2011-10-19 01:37 · Score: 5, Insightful

People keep saying that BitCoin will have it's value as long as people keep using it and that you're not supposed to get rich by mining. But that isn't even the problem. I transferred some cash to BitCoins and back on Friday and it was paid out to me on Sunday. By the time I got the transfer, it had lost almost half of its value. Now imagine if that would constantly happen with your real money. It wasn't much, but I sure as hell aren't going to use it again. This is why PayPal and other ecurrencies are fixed to real world value - they are stable (as far as it can be), and BitCoin can't ever get as stable as real world currencies (yes I know they aren't that stable, but that just means even bigger problems with BitCoin)
1. Re:Bitcoin by Smallpond · 2011-10-19 01:40 · Score: 5, Insightful
  
  You may have lost money on it, but somebody gained. Currency speculation has been around a long time. Most currencies aren't as volatile because there is a government making a monetary policy to control it. Bitcoin is a real opportunity for speculators.
2. Re:Bitcoin by Goaway · 2011-10-19 01:42 · Score: 4, Insightful
  
  Oh, that's nice. I can give my money to speculators! Let me get right on that.
3. Re:Bitcoin by DrXym · 2011-10-19 03:04 · Score: 4, Insightful
  
  So it's directly comparable except in the sense that Bitcoin lost half its value in 2 days versus 10 years in your handpicked scenario.
4. Re:Bitcoin by murdocj · 2011-10-19 03:38 · Score: 4, Insightful
  
  In other news, there are no "sure things" in this world. If Vladimir Putin goes nuts and unleashes Russia's nukes, clean water and non-radioactive food is going to be a worth a whole lot more than dollars, bitcoins, or gold. In the meantime, comparing Bitcoin losing half it's value in 2 days to the chance that you won't get your federally insured deposit money back is absurd.
5. Re:Bitcoin by Chris+Burke · 2011-10-19 04:17 · Score: 4, Insightful
  
  You mean Bitcoin is directly comparable to the currency of an unstable currency like Zimbabwe's that I also would never dream of transferring any of my comparatively rock-stable $US to.
  I do believe you are completely correct in that.
  
  --
  
  The enemies of Democracy are
Winner: ATI by bengoerz · 2011-10-19 01:42 · Score: 5, Insightful

And the winner of this whole experiment ends up being ATI, who sold a bunch of GPUs to doe-eyed bitcoin miners.
1. Re:Winner: ATI by Hazel+Bergeron · 2011-10-19 02:50 · Score: 4, Insightful
  
  During a gold rush, sell shovels.
Crash? More like correction. by Cainam · 2011-10-19 01:44 · Score: 4, Insightful

It seems more like a correction to me. The idea that a BTC was worth $20 or more seemed too good to be true, probably because it was.
I think BitCoin is a great concept, but it needs more of a real economy and less currency speculation. I suspect that will come once the hype dies down. Maybe now that the value has gone down, that'll happen soon.
1. Re:Crash? More like correction. by betterunixthanunix · 2011-10-19 02:08 · Score: 4, Insightful
  
  I think BitCoin is a great concept
  Except that decentralized digital cash is inherently flawed, since the tokens will always grow linearly in the number of transactions they are used for. In other digital cash systems, this problem is solved by having an issuing authority (bank, government, etc.) that accepts old tokens and issues fresh tokens. In the case of Bitcoin, no such authority exists, so the tokens are just going to keep getting bigger, and eventually they will be too large to be useful.
  
  Not that the technical problems are going to be what kills Bitcoin. In terms of economics, Bitcoin has a shaky basis to begin with: people only accept Bitcoin because they believe that they can exchange their Bitcoin tokens for some other currency. Eventually people need to make that exchange, in order to pay their taxes, but there is no similar need to obtain Bitcoin tokens. The gap in demand is not really filled by Bitcoin's utility as a digital cash system, which is questionable to begin with because of the technical limitations on Bitcoin.
  
  Even if somehow that did not become a problem, there is the fact that Bitcoin is an inherently deflationary currency. This creates problems with hoarding (which we are already seeing), and makes it harder to repay loans (loans are crucial to a functioning economy, despite what those "occupy" protesters tell you).
  
  In short, the odds are against Bitcoin being successful. Really, more traditional cryptocurrency is needed, where a bank issues tokens but the tokens can still be transferred anonymously. Sadly, Bitcoin's failure will make it even harder to start a digital cash bank, since everyone will associate digital cash with Bitcoin and think that all digital cash systems suffer the same problems.
  
  --
  Palm trees and 8
Valuable lesson in currency... by RyuuzakiTetsuya · 2011-10-19 01:47 · Score: 4, Insightful

All currencies are fiat. No matter what they're backed by. Currencies have to exist inside of a strong ecosystem that encourages their trading rather than hoarding.

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Non impediti ratione cogitationus.
1. Re:Valuable lesson in currency... by laron · 2011-10-19 02:27 · Score: 4, Insightful
  
  Gold was already valuable before it was actually useful. If a large fraction of the value of gold was based on it's technical uses, the gold price should be more stable IMHO. The gold price is more based on a circular logic: It's valuable because everyone thinks so.
  
  --
  "Beware of he who would deny you access to information, for in his heart he dreams himself your master."
...And nothing of value was lost. by Kaenneth · 2011-10-19 02:19 · Score: 4, Insightful

Seriously, what did you expect?
Re:Speculation by timholman · 2011-10-19 03:40 · Score: 5, Insightful

The majority of bitcoins is in the hands of a handful who cash in large quantities from time to time thus crashing the market.
Excellent point, and in fact Bitcoin may be one of the cleverest moneymaking scams in recent memory.
No one knows who Satoshi Nakamoto, the purported creator of the Bitcoin protocol, really is. Assuming Bitcoin ever achieved widespread adoption, he and a handful of early adopters would become the richest people on earth by default. When I pointed this out to a Bitcoin "true believer", his response was along the lines of "Well, he's a genius and deserves it." Yes, but if in fact "Mr. Nakamoto" is simply a syndicate of very clever scammers, then we would effectively be turning over a huge portion of the world's wealth to a criminal enterprise. No government is EVER going to allow that to happen.
No cryptographic currency is ever going to gain any traction if it makes early adopters obscenely wealthy just by default. Consequently, the only way anyone will ever make money from Bitcoin is via speculation. The people pushing Bitcoin are appealing to the same mentality (and lack of logic) you see with believers in gold currency. Given the long history of scams involving precious metals, there is clearly no lack of potential victims willing to throw away their money.
I assume the early Bitcoin adopters are cashing in before the entire house of cards collapses. If that was Satoshi Nakamoto's intent from the start, then my hat is off to him for committing what is essentially the perfect crime.