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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
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.
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.
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.
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.
Would things like cryptowall be feasible without it?
Of course they would. There's more than one way to pay ransomware authors.
For example, they can buy a large amount of a penny stock, then demand that their victims buy that stock x - done quickly enough, often enough, stock gets pumped. they dump.
They can start their own "anti-virus" company, and offer a service to unlock the hard drives cheap. Works better if they're also (through emails) asking for much more money, so it appears there are two actors - the crook and the anti-virus guys, instead of them being one and the same.
I'm sure you can think of more.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
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.
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...
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.
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.
The value of Dogecoin has gone up and down too, going from almost nothing to almost nothing.
Get free satoshi (Bitcoin) and Dogecoins
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?
What about grugerrands? Last time I checked you pay their weight in gold, so?
Stock market is the bathwater, and utilitarian trade is the baby.
Which was my whole point. Many people have it backward. Not only is the stock market NOT "the economy", it isn't even a good measure of the health of the economy.
Witness the fact that the stock market was always doing "just fine" or even better, just before a huge economic slump. There is a genuine negative, but not necessarily predictable, correlation.