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.

Comments

Bitcoin

[fustakrakich]

Just another commodity rip off scam. We need a medium of exchange that stands by itself, not subject to speculations of the 'market'.

Re:Bitcoin

[Anonymous Coward]

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.

Re:Bitcoin

[Anonymous Coward]

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...

Re:Bitcoin

[neilo_1701D]

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.

Nothing has been lost!

[I4ko]

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.

Re:Nothing has been lost!

[pr0t0]

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.

Re:Nothing has been lost!

[Anonymous Coward]

"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

Re:Nothing has been lost!

[timholman]

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".

Re:A metric for price

[itzly]

thereby redistributing the mining hardware and decentralizing mining, as it arguably should be.

Large scale decentralized mining isn't going to happen, though, because mining will always be at the edge of profitability, where only the most efficient survive. Those are the large scale operations in areas with cheap electricity.

Currency Hedging

[jratcliffe]

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.

Re:A metric for price

[OverlordQ]

> 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.

Hmmm ...

[gstoddart]

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.