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Bitcoin Tumbles From Record High After Exchanges Confirm Outage
Fearful of missing out on the frenzy in the Bitcoin world, several people were left disappointed on Wednesday noon after they were unable to buy some cryptocurrency because the websites of Coinbase and Gemini, two of the largest online exchanges for Bitcoin trading in the United States, were either down or taking too long to load, they said. In a statement, Coinbase said it was facing issues handling the overwhelming traffic it has been receiving on its website. Bitcoin surged past $11,000, the highest it has ever been, early Wednesday, though it has since taken a tumble as well, going as low as $9,290.30. Gemini said in a tweet it had resolved the performance issues, though some users continue to report delays on the website. Bitcoin's professional trading platform GDAX and exchanges Kraken and Bitstamp were also facing issues on Wednesday. The issues had been addressed, they said.
Bitcoin (all cryptocurrency, really) is clearly in a bubble. (You did not need me to tell you this)
You can obtain Bitcoins three ways: by mining, by exchanging it for another currency, or in exchange for a good or service.
Outside of darkweb drug markets and ransomware payments, I don't see much exchange going on for goods/services. That raises some red flags, but isn't itself cause to write it off as a bubble - it can have utility value as an intermediate between other currencies.
The exchange rates, right now, are in the realm of 10,000 USD per Bitcoin.
Getting a USD->XBT conversion rate via mining isn't straightforward, but a Fermi estimate can be done. Mining with current ASICs is about 1W per GH/s, and with electricity prices at roughly 0.10 USD per KW-h, and a mining difficulty of about 1TH, that works out to 1 USD per 36,000 Bitcoin.
Those numbers are drastically, drastically off. This is not an ideal market - the cost of the ASICs is non-zero, currency exchanges take money for overhead, etc. etc.
But these numbers are off by eight orders of magnitude. Any sane person with money to risk on this would be buying mining kit as fast as possible, selling all their bitcoins immediately to buy more electricity and gear, and repeating until the cost of power/ASICs increased, the Bitcoin mining difficulty increased, and the value of Bitcoin dropped, to make the exchange rates more or less equal no matter whether you take your dollars to an exchange, or use your dollars to buy electrons and convert them into Bitcoin.
Many people are doing just that, but the price disparity is instead growing greater, in defiance of every rule of capitalist economics. And that's because the price is not based on Bitcoin's utility as a currency, but instead as an investment vehicle.
Sorry dude, it's way past the point it was profitable to use computer downtime for it. At this point, the ammount you'd get from it wouldn't pay the extra electricity cost, much less wear and tear of hardware.
Years ago, even before the value reached 2000 bucks, it was already only profitable for chinese farms running extremely barebones on junk parts inside warehouses using stolen electricity. You can imagine how it is now.
Well, unless you go for something other than Bitcoin I guess. Plenty hard to choose what will be the next successful blockchain currency though, there are just too many out there.