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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.
> 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.
The difficulty only gets changed after the number of blocks since the last adjustment have been met. If less people mine, blocks take longer, blocks take longer, adjustment takes longer. So if people keep dropping out, it'll be a lot more than two weeks for the next adjustment.
Your hair look like poop, Bob! - Wanker.
The eventual collapse of Western Civilization after fiat currency goes kablooey. Last time that happened was the end of the Roman Empire in the 5th century. Even if that doesn't happen, the value of precious metals will continue to rise. Buy low, sell high.
Bitcoins have not lost any of their utility, at all. If I want to buy something that costs $200 in bitcoins, I go get $200 in bitcoins and then buy it. It doesn't matter how many bitcoins I get for $200, the system is still working exactly like it always has. If someone decides that they want to buy $1000 in bitcoins, spend a fifth of it, and save the rest for another purchase later, they might find out that they don't have enough for another purchase whenever they get around to it. The volatility of bitcoins is just proof that you shouldn't horde them, there's no reason to do that. But the system in general has lost exactly zero amount of usefulness.
"Our two-party system is like a bowl of shit looking at itself in a mirror." - Lewis Black
There are many reasons. For example, speculating with currencies produces no product and no useful service for society, and is in that sense also not work. (Just as sitting on your money and watch it grow is not work.) There is also no guarantee that the dynamic systems created by such speculations are sufficiently stable and non-chaotic to ensure that they won't collapse some day out of the blue and ruin thousands people and companies in the course of it.
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.
Sure. But the value of precious metals isn't going to collapse like bitcoins, fiat currency or anything else created out of thin air if investors and speculators stop believing.
Tell that to the gold speculators.
Look at the price of gold over time: http://goldprice.org/gold-pric...
If you bought gold on August 19, 2011 for $1850 / oz, you would be pretty sore today at $1262 / oz. The period of September 24, 2012 through to July 2, 2013, where gold dropped by $512 / oz looks like a collapse to me.
So more than half the worlds currencies don't count either because they don't have substantial military backing?
Many of those currencies are fixed currencies that are pegged to the US dollar, the Euro, etc. A law on the books stating that X local currency equals Y foreign currency. So yeah, the GP has a point.