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Bitcoin Volatility Puts Miners Under Pressure
An anonymous reader writes "The virtual currency Bitcoin lost 21 per cent of its value yesterday, equating to a total loss this year of 44 per cent. Reports have suggested that this rapid fall is squeezing computer supporting systems and is raising alarm about its future viability. Bitcoin's value fell to $179.37, 85 per cent lower than its record peak of $1,165 at the end of 2013. In total, nearly $11.3bn has been lost in Bitcoin's value since its 2013 high. The decline has raised concern for Bitcoin 'miners' who support the transactions made in the digital currency, and whose profits become squeezed as its price falls against traditional currencies." The Coindesk article in the linked story gives a blow-by-blow on yesterday's valuation drop; right now, Bitcoin has jumped back up and stands at just over $216.
Just another commodity rip off scam. We need a medium of exchange that stands by itself, not subject to speculations of the 'market'.
“He’s not deformed, he’s just drunk!”
It was never there in the first place. You can only lose your direct investment - electricity cost and some portion of the hardware cost as in case of hardware it still has some deprecated value. Market speculant crying that they couldn't unload in time and the risked turned out to be greater than they speculated they would be. Sorry, I have no sympathy for you. You have not created any product of value, so you cannot have lost anything of value. Calculating value on something you never had and losing said value is the same balloon American financial system has been pumping over and over again. It lost a lot of vapor in 2008 and required quite a lot of patching. GO cry somewhere else.
The be-all-end-all of pricing is mining profitability. Bitcoin's difficulty to meant to adjust according to mining activity. If there isn't enough mining going on to produce the mining rewards that should be awarded daily, the difficulty will quarter every two weeks until the rewards are enough to incentivize miners to continue doing so. So, mining operations might have to stop or turn down the heat in order to stay profitable at the current difficulty, and await the approximately bi-weekly adjustment of difficulty before resuming. However, that next adjustment might not be sufficient to restore profitability, so the stoppage or reduction might have to continue through multiple difficulty adjustments.
If mining farm operators didn't plan for this possibility, then they didn't think through the inevitabilities of Bitcoin enough to maintain their business and they are destined to flood the market with their mining hardware, thereby redistributing the mining hardware and decentralizing mining, as it arguably should be.
Colin Dean Go a year without DRM
RUSSIA losing 64% is a BIG STORY....
So, Bitcoin wil be subject to volatility, like every other currency and precious metal in history, and that will cause troubles for the people who actually extract the stuff. Who (aside from anyone in the mining business) knew?
Bitcoin was designed so when all coins are mined, there will be transaction fees to cover the costs.
It was also designed to allow transaction fees at any time.
Maybe that time is now???
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Wow. Speculative, sentiment valued stock looses value. I'm shocked. Totally shocked. Why didn't slashdot publish a story when the price ran up for no reason? Tesla, you're next.
So nothing is turned into something of value, only to go back to being worth nothing. Sounds like the circle is completing itself.
Having your expenses denominated in one currency, and your revenue in another, leaves you open to currency fluctuation risk. This is why currency hedging was invented in the first place.
"raising alarm about its future viability"
To whom?
So, overpriced speculative currency found to be overpriced?
When BitCoin was worth over $1000, why was it worth over $1000? Because people said it must be, not because it's backed by anything which objectively made it worth that much.
I've always looked at BitCoin and wondered what the value was in it -- sure, people said "Yarg, no regulations, no governments". But did you really think that would last? Or that without those people would be honest?
Basically BitCoin created a bubble, inside of a reality distortion field, and people assumed it would go up forever and always stay that way. And it's been all hype since then. But it seems like we've been discovering that the players are either shady or incompetent, and that it doesn't look like all of the voodoo magic ascribed to it.
BitCoin seems like it's always been an idea, but somewhat divorced from reality. Essentially, it placed value on ... what ... large prime numbers?
As someone who has always been skeptical of BitCoin, I don't find myself seeing any reason to think it was ever anything but something people wanted to believe in, but which was never going to pan out as claimed.
This is like the people who were still buying tech stocks at the end of the .com bubble. It's musical chairs, but with money. Only now people are starting to realize there's not a lot of seats left.
Lost at C:>. Found at C.
All collapse eventually.
I am not sure about the rest of you, but I expected this and IMHO Bitcoin will be subject to high volatility for a long time to come.
Also is it not possibly that there are entities out there purposely trying to undermine it? Such as governments who can no longer control the money supply (and their favorite hidden form of taxation, inflation!). Destroy the confidence people place on Bitcoin, if enough lose faith it will start a negative feedback loop and we can watch it spiral down to it's death.
Having your expenses denominated in one currency, and your revenue in another, leaves you open to currency fluctuation risk. This is why currency hedging was invented in the first place.
And central banks because the open markets aren't good enough - especially when the entire market of all currencies goes to hell in a hand basket because of: oil shocks, terrorism, world wide economic troubles....
I met a traveller from an antique land
Who said: "Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed:
And on the pedestal these words appear:
'My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!'
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.
Would things like cryptowall be feasible without it?
Of course this happened. And when they stop being gifted bitcoin in return for mining, it will happen even more.
Your ad here. Ask me how!
The golden rule of most investments is "it's only a loss when you sell it." I mined 43 BTC about 3 years ago and I was mining at a 2:1 loss on electricity for most of it but I just held the coins. Then I sold them and my rig hardware when BTC was at $5.20 or so and made a slight profit. If you're mining at a loss or profits are down, just wait to sell the coins!
Transaction fees are already in use. The amount can vary based on demand and supply, so no reason why those would kill bitcoin.
The attraction of bitcoin as a transaction service is linked to its low fees. If mining must be supported by fees and fees rise to appreciable levels then bitcoin loses its competitive advantage against other services.
The public at large is not part of the "movement", it isn't buying into the politics as a justification to use bitcoin. The public at large is very different from the enthusiasts, the public must have an immediate tangible benefit to use bitcoins.
"raising alarm about its future viability" To whom?
The public at large. A bitcoin recipient needs to take no risk, they can immediately convert to dollars, euros, etc. This is how many merchants touted by the bitcoin community operate. They do their accounting and pricing in dollars or euros, when offered bitcoins they calculate an amount based on the real-time exchange rate, accept the coins and immediate sell the coins for dollars or euros. Technically a 3rd party, a bitcoin exchange, actually does much of this so the merchant never actually sees or touches a bitcoin. Which keeps their accounting simple and avoids tax complications, yet another deterrent the public is just about to learn about.
Now on the public side, the sender side, the bitcoins are generally "stored" in a "wallet" for a time frame longer than minutes. "Spending money" for some number of days? The senders are more exposed to volatility since they are generally holding bitcoins.
A medium that doesn't deflate value by randomly printing more paper.
Does it matter if the value deflates due to printing as in the dollar case, or a lack of interest or lack of faith as in the bitcoin case? Last year's $1,000 bitcoin is this years $200 bitcoin. Why would the public care about the cause rather than the result?
That said I agree that bitcoin is useful as a mechanism to transfer value, as a transaction method, but as a store of value it currently fails. Its totally subject to consumer (goods/service buyer) and investor sentiment, merchant (goods/service seller) sentiment is irrelevant since merchants accepting bitcoins generally immediate convert them to dollars, euros, etc to avoid holding risks.
that Roger Ver gave up his citizenship for nothing?
How delicious.
backing: no currency in the world is backed by anything other than the dirt upon which that country sits. and that ONLY holds when you do NOT have a central bank manipulating things through loans and burning and printing currency. and when you fuck up your country beyond that which your bank can manipulate, your dirt becomes worthless. bitcoin is backed by pure and natural market dynamics, mining investments, float and so on. this is a strength of bitcoin and is exactly as it should be.
deflating/inflating/21M: totally moot, see above.
volatility: no shit, any new currency will be volatile. it needs many users doing mundane daily things with it, not speculating like buying a shitload then panicing and selling when other dynamic shift down for a while. bitcoin is volatile due to speculation, nothing else. this is not a weakness of bitcoin.
mining: is irrelavent regarding reward of new coins, tx fees will takeover and rise to replace them, end of story.
what is happening: the buy and holders decided they needed fiat instead of bitcoin. they are weak hands getting out. guess what... they'll all be back in on the next rocket ride up. rinse and repeat, but lesser and lesser each time. because each time triggers a wave of adoption. so....
what will happen: the price will continue on various coaster rides while more businesses and users adopt bitcoin, meaning they've installed it, played with it and are ready to go. then a MIRACLE will happen!!!!! people will actually start to buy coins to put in their wallet so they can spend some of them because they like the phlosophical and technical properties of it. since because you are not buying and spending in one split second atomic transaction, you will always have some floating in your wallet just like cash. now, multiply that few tens or hundreds held across ten/hundred million users/divided by 21M coins... BING WINNER there's your new price. $50 held 10M users 21M coins = $23, $100 held 50M users 17M coins = $294, $500 held 100M users 19M coins = $2631
GET THE PICTURE???
Me? Totally not worried. Buying more while they're on sale.
Because thats an awesome idea, make it easy for some organization to artificially inflate the value of a currency by running ads on TV and the internet about how you should invest in some precious metal, creating fake demand.
No, not at all. When the currency represents an amount of gold there is no such speculation or hedging. You already have gold, that US Dollar represents a certain amount of gold sitting in the US Treasury.
Tying currency to a physical substance (gold) only makes it easier for outside organizations to manipulate that currency since they can play with the values and availability of stockpiles of said substance outside of your control.
No. When the currency is gold based then the gold is typically under the control of the government, physically possessed by the government. Private stockpiles would be dwarfed by the government treasury and would only exist at the government's pleasure. At any time a government could seize a private stockpile and leave behind an equivalent pile of dollars. For example United States Gold Reserve Act of 1934.
That said I'm not advocating a return to the gold standard. I'm just point out that some scams are specific to certain financial models, that they do not universally apply.
Quick, time to exchange my Bitcoins for Rubles and stock in Blackberry... oh wait.
Or maybe Canadian dollars... oh wait.
Like regular currencies or stocks, pseudo-currencies are also volatile.
Won't someone PLEASE, THINK OF THE CHILDREN?!?
Oh wait. I can spell. Miner != minor. There are no minors under pressure here.
Never mind.
Back to your regularly scheduled Bitcoin rants to benefit the Winklevi...
...can buy an effing decent video card at non-inflated Bitcoin-mining-speculation prices!
The strength of a currency has nothing to do with the issuing body's military and diplomatic power. What jellomizer was saying was that while the printing of the US dollar is controlled by a government institution that could print arbitrary amounts of money, bitcoins cannot be arbitrarily created.
But a bitcoin's value is also arbitrary, it is based on the faith of those who hold it. Arbitrary creation is just a talking point. A more stable supply did not constrain the skyrocketing from $60 to $1,000 nor did it prevent the crash from $1,000 to $200. Faith drove both.
Development teams and advocates can make up rationales for their theory of value, i.e. the value is equivalent to the mining expense, but such statement are just salesmanship, marketing, they have no force. Virtually currency value is entire faith based. If there is sufficient and constant faith it could work but that doesn't change its underlying faith based nature.
with the bathwater.
bitcoin ceased being mined with video cards over a year ago, theyve already been sold, youre an idiot.
A national currency that routinely swung by this amount would be a national crisis. (For example, something similar happened to the Swiss yesterday (they abandoned a policy to keep the Franc weak), and it's making headlines all over the world. And it's just a one-time event.) The economy would be in shambles as all trade came to a screeching halt, due to the complete and total inability to properly price contracts. Even used solely as a money-transfer system (instead of a real currency) it still swings too wildly. By the time you can unload the bitcoins somebody's transferred to you, you could lose your entire profit margin.
Even if you buy bitcoins, unload them ASAP to buy something, and then the receiver unloads them ASAP to get them back into something a tad more stable, it's STILL too volatile to rely on. A retailer could lose a significant chunk of his/her margin in the lag time before the coins can be transferred again.
Every fiat currency in the world is backed by the guns and ammo the country can bring to bear in the event of war, because might implies stability.
Fiat currencies are backed by nothing more tangable that that which underlies bitcoin. It's all a matter of confidence. The biggest problem with bitcoin is psychological. Humans, on the whole, have been duped into believing that inflation is good, and that more money means more value (ignore the fallacy there, most people will never understand it). Bitcoin is a (nominally) fixed supply, which means that it's value related to other fixed supply goods, in a perfect market, will never change. To someone who has used fiat currency all their lives, that's a bad thing.
In fact, as bit coin value goes up relative to fiat currencies, the payments in bitcoins (how much you "make" on a transaction) goes DOWN, which is the worst thing you can show any average Joe. The flip side doesn't help - if the value of bitcoin goes down, then the public sees it as a commodity which has lost value and is therefore a bad investment.
IMHO bitcoin can't win.
Is it just my observation, or are there way too many stupid people in the world?
In other news, a recent google search comparison revealed that 24 percent of people still spell it per cent, whereas less than .001 per centum spell it that weird fucking way.
- Holy crap, I've got MOD points! Who thought that was a good idea.
i expect russia is dumping btc.
They are making the consequences of economic folly, like doing anything monetary or serious with bitcoin, plainly obvious and providing a valuable public service!
Bitcoin is a total fail as a currency because there is no bond market in bitcoin. Why would there be? Any of you bitcoin hoarders up for lending bitcoin for 10 years? Didn't think so.
If you want a tangible commodity, there are many options to buy and hold them.
Bitcoin is a success for anonymous money laundering and illegal activities.
sounds pretty useless. Crude oil will never collapse to zero.
Pretty amusing that the allegedly unregulated and independent Bitcoin market is all about the exchange rate with "useless fiat currencies" like the dollar.
Sure, you can buy things with bitcoins, but the bitcoin price is based on the exchange rate to the dollar. And most bitcoin users are not using BCs as shopping currency. They're speculating in order to get more...say it with me...dollars.
If dollars are so useless, then why all the worry about how many dollars a bitcoin can get?
The value of Dogecoin has gone up and down too, going from almost nothing to almost nothing.
Get free satoshi (Bitcoin) and Dogecoins
More like Dunning-Krugerrands, if you ask me.
Sounds like the Butt-coin mimers feel like their entitled to a profit and ever increasing value.
Maybe the Libertarians are learning a little about real world economics?
Naw, that's too good to be true.
Joe is capable of and will understand that if you take the hour it requires to explain it.
Your failure to correct clueless Joe, instead of the OP who pretty much has it right btw,
contributes to the reasons why people incorrectly say bitcoin can't win.
Have you introduced and corrected a Joe today?
Speculation provides the liquidity that ensures that there will be a market in the first place. What is the price of something without a published bid and ask price?
Hey people, remember Ponzi?
Bitcoin has, and always will be a Ponzi scheme. Those who are last to jump in are the ones who lose the most.
... until some rich other schmuck decided to dredge the gold up off the ocean floor, which would be 2 years from date of dumping. Hypothetically speaking.
The value of "price discovery" is just one more fiction shoved up our collective asses by the parasite class who, by virtue of their middleman status, extract rents from all of us while producing nothing of value. This is true in currency markets, energy markets, ...all markets.
None of the markets big enough to attract speculators needs the added 'liquidity' of the speculator's coin in the game. All the big markets have plenty of volume/liquidity by sheer need of suppliers and consumers.
Speculators are, and always have been, parasites.
20:1 leverage for the win bitches
Let's analyze what major flaws Bitcoin has:
1. It is too volatile to be adopted as a medium of exchange, i.e. customers and merchants are at price risk while holding it.
2. It consumes a ton of energy to provide network security. Those energy bills have to be paid by someone and they are.
At the risk of being slaughtered by Bitcoin fans... there are alternatives:
Bitshares (an alternative crypto currency) that solves both of these issues while keeping Bitcoin's advantages (no counterparty risk with transactions / no changebacks, privacy (actually more privacy), low tx fees (actually much lower fees)). How does it do that?
1. Volatility is solved by creating a crypto currency that is pegged to real world assets. For example: 1 BitUSD for example will always be worth 1 USD. On how it works: http://bytemaster.bitshares.org/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/ and http://bytemaster.bitshares.org/article/2014/12/20/BitShares-as-a-Bank/
2. Network security costs are reduced by replacing the "proof of work/energy" with "proof of stake". The proof of stake system Bitshares is using (delegated proof of stake) is different from "normal" proof of stake. More: http://wiki.bitshares.org/index.php/DPOS
There is a heated debate about all the various crypto currency projects and as you can see I am pretty convinced of this one. I that one of those Blockchain 2.0 protocols will be the next wave of crypto currencies. But do your own research!
Projects like BitShares are already implementing mechanisms that solve the problem of volatility. With this solution you have bitUSD, bitGOLD, etc. which have all the benefits of Bitcoin but with the stability of USD, Gold. So just like Bitcoin the system is completely decentralized and open and free for anyone with extremely low fees, and even has some enhancements as well, like 10s transaction times, a decentralized exchange, and many other cool "Bitcoin 2.0" features.
This is not some future utopic vision, this stuff is available right now for free, you can download it, you can review the code on github, you can even be hired by the BitShares blockchain as people vote on employees: http://bitshares.org/?r=page01
With VC investments in 2014 topping that of the internet in 1995 we are seeing massive innovation in this space, which will still take a couple of years to mature. Remember that the dot com bubble was beginning only 2 years *after* (1997-2000) the internet saw the level of VC money we are seeing in the Bitcoin space now.
People think the internet is so much bigger than this new blockchain technology, but I don't think people understand how important a decentralized structure for transferring money and value really is. At this point there are a few centralized authorities in charge of everything, as we have seen when Visa and Mastercard blocked Wiki-Leaks for instance. The internet will never be truly free until people have private control of their own information, property and financial transactions.