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Bitcoin Volatility Puts Miners Under Pressure

Posted by timothy on from the coulda-shoulda-woulda dept.

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.

10 of 290 comments (clear)

  1. Nothing has been lost! by I4ko · · Score: 5, Insightful

    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.

    1. Re:Nothing has been lost! by jellomizer · · Score: 1, Insightful

      That logic works with any modern currency system.

      Even if it is linked to Gold. Unless you are using it for its physical properties, the fact that it is valuable is because of scarcity. So we attach an artificial value based on our human needs to want what is scarce.

      Currency in general is just common agreement to scale work for goods and services. Because we live in a world where we cannot get everything we want.
      Bit Coins are actually more real then the US Dollar. Sure we get a paper or coin note stating that this represents so much. But at least bit coin is connected to something in limited supply thus needs to be shared.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
    2. Re:Nothing has been lost! by pr0t0 · · Score: 5, Insightful

      Agreed. Also, I don't ever recall return on investment as being one of the selling points of BitCoin in the first place. It was meant as an alternative to currency, not an investment vehicle. Even if the value dropped to parity with the US Dollar or below, it would still retain its initial utility. So again, nothing lost.

      --
      I'm sorry, but your opinion seems to be wrong.
    3. Re:Nothing has been lost! by Anonymous Coward · · Score: 5, Insightful

      "Bit Coins are actually more real then the US Dollar."

      OK, so where is the bitcoin Navy that is going to protect global trade?

      You have got to be kidding... right?

      I will buy into the idea of the 'full faith a credit' of bitcoin when it can project itself globally with both ambassadors and military power, until then it is just another attempt to pick my pocket

    4. Re:Nothing has been lost! by timholman · · Score: 5, Insightful

      Bit Coins are actually more real then the US Dollar. Sure we get a paper or coin note stating that this represents so much. But at least bit coin is connected to something in limited supply thus needs to be shared.

      I've never understood the logic behind statements like this. There are an infinite possible number of cryptocurrencies. A cryptocurrency is nothing but a mathematical algorithm being run on a lot of computers. By its very nature, it can't be in limited supply. Saying that Bitcoin is valuable because it's scare is like saying that digital music or digital video must be valuable because they're scarce.

      Any one, at any time, can create his own blockchain and create a Bitcoin clone. After that, all he need to do is persuade other people to adopt his blockchain, and a new standard has been created, with the originator becoming "wealthy". In fact, I suspect that this idea may suddenly occur to the operators of one of the big idled mining centers over the next few months.

      And before anyone says, "But Bitcoin was first!", let me reply, "Friendster and MySpace".

    5. Re:Nothing has been lost! by jdavidb · · Score: 2, Insightful

      Bit Coins are actually more real then the US Dollar. Sure we get a paper or coin note stating that this represents so much. But at least bit coin is connected to something in limited supply thus needs to be shared.

      I've never understood the logic behind statements like this. There are an infinite possible number of cryptocurrencies. A cryptocurrency is nothing but a mathematical algorithm being run on a lot of computers. By its very nature, it can't be in limited supply. Saying that Bitcoin is valuable because it's scare is like saying that digital music or digital video must be valuable because they're scarce. Any one, at any time, can create his own blockchain and create a Bitcoin clone. After that, all he need to do is persuade other people to adopt his blockchain, and a new standard has been created, with the originator becoming "wealthy". In fact, I suspect that this idea may suddenly occur to the operators of one of the big idled mining centers over the next few months. And before anyone says, "But Bitcoin was first!", let me reply, "Friendster and MySpace".

      A Bitcoin is a unit of account in a specific ledger. The number of units of account in that ledger is finite. Additional ledgers can be created, and have been. But the value of units of account in those ledgers is not equal to the value of the unit of account in the Bitcoin ledger.

      It's a little bit like comparing seats at a concert. Yes, we can put more seats in the back, but they are not valued the same as seats in other sections. We can create more seats, but we can't create more seats in the front row.

      --
      Secession is the right of all sentient beings.
  2. Re:Bitcoin by Anonymous Coward · · Score: 5, Insightful

    What many forget is that bitcoin is not a regulated market. That means no one pulling the plug to let people calm down. There is no value other than the dollar against it. The dollars value against other currencies has strengthened over the past year. So in relation to bitcoin you are going to see lower prices with it. Bitcoins value is only in other dollars (with a few exceptions). What do I mean by that? If you buy something with bitcoin it will be in relation to the current value in the local currency. Stronger external currencies will mean weaker purchasing power for bitcoin.

  3. Re:Bitcoin by Anonymous Coward · · Score: 1, Insightful

    A medium of exchange that isn't subject to speculation. Good luck with that.

  4. Re:Hmmm ... by brunes69 · · Score: 3, Insightful

    Why is 1oz of gold worth $1262? Because people said it must be, not because it's backed by anything which made it worth that much.

    This is how pricing works. There is no item or unit or work in the universe that has some kind of intrinsic price. Items are worth what the market will pay for them, period.

  5. Re:Bitcoin by Anonymous Coward · · Score: 5, Insightful

    Just to get this straight: your financial planning is based on taking your entire ~75 year life's savings and, in preparation for a 1/1600 year flood, invest it in a single commodity(whose value fluctuates according to INDUSTRIAL demand roughly 100% up or down over a 3 year period) and hope that the world falls apart at 1/21 odds in your lifetime? And you are doing this because you believe that SLV will be worth more than .22lr, cigarettes, alcohol, or antibiotics, under the collapse of western civilization scenerio, because it's so useful to industrial consumers, such that your concerns regarding financial prosperity and financial security make THIS gamble an excellent opportunity, in the long run, to stave off bankruptcy and maximize profit according to currently dominant property rights paradigms, despite the short term volatility risk exposure?

    Would you consider yourself a "cup 20/21 empty" type personality?

    I don't know if I should admire your willingness to bet it all(like your entire life), mock your choice of apocalyptic investments, acknowledge that timing the market is impossible(so any one fairly priced investment should be equally valid if you aren't going to spread your bets), or worry about the scenerio where Silver turns out to be the secret ingredient to nuclear fusion power generation and I eat my words when mad max is driving his Mr. Fusion to the battlefield.

    I hope you are at-least dollar cost averaging your entry point in that position over the entire 75 year period and plan on having 21 generations of grandchildren to make the expected value of this bet worthwhile!

    My recommendation is that you skip next month's silver investment and buy an "introduction to statistics" class at your local community college...