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BitCoin Value Collapses, Possibly Due To DDoS
hydrofix writes "The Bitcoin-to-USD exchange rate had been climbing steadily since January 2013, from around 30 USD to over 250 USD only 24 hours ago. Now, the value bubble seems to have burst, at least partially. The primary trading site MtGox reported a drop in value all the way down to 140 USD today, a loss of almost half in real value. With many sites unreachable or slow, there are also news of a possible DDoS attack on MtGox: 'Attackers wait until the price of Bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their Bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can. Repeat this two or three times like we saw over the past few days and they profit.'"
Today's high was $266, the low was $105 and currently it is trading around $180
We really need a corollary for Godwin's Law adapted specifically to Bitcoin discussions: as soon as you say, "The US dollar doesn't have any intrinsic value either!", you lose.
Dislike the Electoral College? Lobby your state to join the National Popular Vote Interstate Compact.
...and you've just got mtgox DDoS'ed again. Well played, Sir.
OTOH, tulip bulbs do have intrinsic value, hence they are the ideal currency.
Escher was the first MC and Giger invented the HR department.
Google Glass will be the rich-nerd monocle of the 21st Century
If it works right etc
Wish I had bought some Bitcoins (or mined up a bunch) in January.... They're back up to about $200 now. From about $15/ea in January. Could have been more than a tenfold return if timed right.
The solution's the standard one: take the long-term view. If you think Bitcoins are actually going to be worth that much long-term, don't sell. Hold onto them, and buy during the drops. If you think Bitcoins aren't worth their current value long-term, sell before another drop happens and don't buy back in. The speculators (because that's what's driving any manipulation) depend on people dumb enough to do short-term trading while lagging behind the curve. They're professionals with all the tools, so as a non-professional the only way you can win is to not play their game.
Rule of poker: there's always a sucker at the table. If you look around and don't see one, it's you.
Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor.
To illustrate this, take a dime from 1942, you could buy a gallon of gas with it back then. But you can still buy a gallon of gas with the same dime _because_ it is made out of silver.
Do it. Nine times out of 10 or more, I'll bet the attendant will say "Nice try buddy. That's a dime. It's worth 10 cents. Now pay up!"
Fiat currency works both ways. You want to get your $1.99 out of the dime, melt it down and take it to somebody who buys silver. Less fees and commissions. If it's a collectable dime, you might get more selling it to a numismatist, but the "value" of the dime will be in in its collectability, not in its silver content.
Even in 1971 the idea that everything in the world had a gold equivalent was absurd. These days we have computers and big-screen HDTVs that no amount of gold could give you back then. For a little while, these items may be worth hundreds or thousands of dollars, despite being made from inexpensive materials, then their value will plummet as something newer and better comes along. The amount of gold is limited and so, too is the value of the goods and services you can buy with it. If you owned all the gold in the world and spent it, you would still not own most of the world.
Value is what people give to things, not what things inherently have. To a parent of starving children, the only value gold has is if you can convince someone to accept it in exchange for food.
Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor.
And with High Frequency Trading, you can get rid if your sandwiches before they go bad. Everybody wins!
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
Dude, you can buy "pizza" with bitcoins.
And by "pizza" I mean, "drugs and hookers."
You mean the renminbi. _A_ yuan is the unit of _the_ renmimbi currency in the same way that _a_ dollar is the unit of _the_ dollar currency.
The government and the bank cartel known as the Federal Reserve can and do print insane amount of money every year to finance government spending, at the expense of the value of every other dollar in existence.
That is at least as questionable claim. The "insane amount of money" that the Federal Reserve "printed" (actually, just enters a number in a computer, but never mind that) was about $280 billion in 2012. Now, that's obviously not a small chunk of change, but it's not even remotely close to funding the $1,126 billion deficit in federal spending in that same year. Where most of that deficit spending money is actually coming from is private investors happily buying up US Treasury bonds (at very low interest rates to boot), which is probably caused by (a) investors fleeing Europe, and (b) record high profits for businesses and their owners that has to go somewhere.
Also important to think about: Ronald Reagan and George H.W. Bush spent more during their administrations (as a % GDP) than Barack Obama did in 2010-2 (2009 was a year he only had partial control over budget-wise), and is currently projected to go lower. The reason deficits are so high right now is that tax receipts are the lowest they've been (again, as a % GDP) since 1945.
I am officially gone from
People who say that modpoints have no intrinsic value are just wrong.
Some of your argument is interesting, but the idea that something's value is equal to the effort that it takes to obtain/create the thing is certainly not the case. There are lots of things that are very difficult to create and/or duplicate that have no value. If I have my computer hash random strings until I get a hash that includes my name in it, even though it might take 10 hours to do (and would take another 10 hours to duplicate), it doesn't make that random string valuable.
Value is the benefit I get from having a good or service (http://en.wikipedia.org/wiki/Value_(economics)). While often times it is correlated with the difficulty in obtaining something, they are not equivalent.
That being said, your argument could still (sort of) work like this: there SHOULD be a cap on the value of a bitcoin.... the $ cost in computing power to mine a new coin. Whenever the price rises much above that, there should be an economic incentive to spend the money mining a new coin instead of buying the coin on the market. Of course, this price isn't a HARD cap, since there is still a capital expense in buying the hardware to mine the coin (or the opportunity cost of not using that hardware to do something MORE valuable), but it shouldn't get too high above that cost.
Of course, the fact that the cost to mine a bitcoin increases with each previously mined coin makes this even more complicated..
Bitcoin does have an intrinsic value: the computing time it takes to mine a bitcoin.
Stop. Bitcoins have an intrinsic COST. The computing time that goes into producing a bitcoin is comparable to the paper and ink used to print a physical US dollar, or the wages and electricity cost of the "creation" of purely electronic dollars. (Which are really debts, rather than currency, but that's an entirely different boneheaded idea that the one you're postulating.)
Once a bitcoin is produced, it cannot be redeemed for an equal amount of computer time. In fact, using a bitcoin requires SOMEONE ELSE to pay for the verification chain that makes this electronic currency at all feasible.
(you're right that it's a bubble, and I'm not here to argue the system's inherent merits or flaws.)
Having said all that: the dollar, in contrast, really does have no practical intrinsic value. Ever since 1971, when Nixon threw the last vestiges of any standard away. (And defaulted on U.S. debt in the process, by the way. People who said the "fiscal cliff" would be the first time the U.S. ever defaulted on debt simply don't know their history.)
The US dollar is backed up by an almost non-intuitive fact of modern society. It's legal tender for payment of debts. As in, if you don't pay your employees or pay for that meal in a restaurant, or if you just wrong someone more generally, the courts will denote whatever judgement is finally ordered against you in US dollars, and if your wealth is denominated in some other currency, you'll be subject to whatever market exchange rate you can manage to produce sufficient dollars to pay the debt.
Or, in short, "people who say the US dollar isn't backed up by anything don't know what they're talking about."
On a different note, though, I'd be interested if you could point to a US debt that was denoted in a weight of precious metal and not redeemed for sufficient value to satisfy the bond-holder. Just because in 1971 the President of the United States stopped offering gold for dollars doesn't mean the US "defaulted" any more than Wal-Mart selling out of ammo means they "defaulted' on that gift card you bought. (The phrase "Redeemable in gold on demand at the United States Treasury, or in gold or lawful money at any Federal Reserve Bank" was gone from bank notes decades before. And still did not specify the amount of gold.)
For every $1000 in deposits, that means they can lend $10,000 at 5% above their costs and payouts, or more, yielding a $500 profit... wow!
1: It's $1,000 in assets. That includes a whole bunch of things beyond deposits, such as certain bonds.
2: That's $500 in revenue, not profit. From that revenue, they need to pay for all of their bills, and their payroll, and account for losses due to uncollectable accounts and outright thievery.
This $500 is spent by them eventually, and helps dilute the value of your original $1000 by inflation... so your "savings" loses value, as they leverage against it in multiple manners....
3: Inflation is a feature, not a bug. The work you did picking tomatoes last year is less valuable to the species than the work you did picking tomatoes today. The species would be better served if you used that same frugality to horde useful items instead of tokens, which is why the market rewards investment over savings.