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Bitcoin's Value Plummeted Overnight and No One Knows Why (slate.com)
Jacob Brogan, writing for Slate: While the Western Hemisphere slept, Bitcoin plummeted. Just after midnight Eastern Time on Friday, the cryptocurrency was valued at a little over $15,000, on the digital currency exchange Coinbase. At that point, it was already well below the $19,783 all-time high it had hit the week before. Over the course of the night, Bitcoin began to decline erratically, occasionally spiking but following a general downward trend. Around 9:22 a.m. Eastern, it hit a temporary floor, valued at a mere $10,400. By that point, it had declined more than $6,000 from its short-term peak the morning before, having lost more than one-third of its value. Bitcoin wasn't the only currency hit by a sharp drop. Tech Crunch's Jon Russell reports that most other prominent cryptocurrencies also fell, including Ethereum, Litecoin, and Bitcoin Cash (which is, confusingly, separate from Bitcoin proper). As Russell notes, it's hard to say why this is happening, "in the same way that nobody knows exactly why bitcoin's price has [shot] up from a touch under $1,000 at the start of the year."
You're trying to understand why a valuation based on bullshit...plummeted?
Please tell me common fucking sense still has value today...
When Bitcoin crashes properly it'll lose 90 to 100%+ of it's value.
Waterfox - a Firefox fork with legacy extension support, security updates and better privacy by default.
There's no "reason" because there's no rational valuation mechanism. Cryptocurrency without a mechanism for value stabilization is a scam. Blockchains are clearly useful for certain kinds of distributed trust problems, but Bitcoin is merely one instance that was always marketed as a cryptocurrency but has zero use as a transaction mechanism. Nobody wants to use a currency that may be worth 20% more, or 20% less the next day.
The only valid use case for Bitcoin I've heard described is as an improved version of the offshore banking system. In other words, a mechanism for rich people to launder and hide money. Of course, a cryptocurrency with value stability would sure as hell be a lot more useful and trusted for even this grey market purpose.
Ultimately, Bitcoin's value is driven by grey and black market activity. Money laundering, cybercrime, etc. Investing in Bitcoin is essentially investing in a residual claim on this underbelly of the economy, in the same way that regular fiat currencies are residual claims on national economies, with a healthy dose of mindless speculation and bubblemania thrown into the mix.
The way I see it, this looks like the smart money pulling out and doing so in the middle of the night as to avoid people seeing the drop, panic selling their bitcoin in response and thus triggering and even bigger drop in the average sell price.
"Why should I want to make anything up? Life's bad enough as it is without wanting to invent any more of it."
I used to work for a (thinly) publicly traded penny-stock company, every year near Christmas its value would tank, usually to around 30-50% of where it was in the October-November time frame. What it was mostly attributed to was people reviewing their portfolio at the end of the year and selling their holdings for "whatever the market will pay," which is what drives the price down initially - then a little bit of panic selling follows that. I think some people do it to book their loss (or gain) before the tax year ends.
I agree, it's profit taking.
It's like how investors pulled $14.5 billion out of the market this week.
This will never go mainstream at scale as long as the underlying transactions are so fabulously expensive. I read a recent analysis that actual blockchain verified trades can cost as much as $20 to execute (when accounting for the capital and power costs of all the people involved in competing for the initial hash solution).
Even if a trade only costs $0.20, that's still too high to compete with the likes of Visa and MasterCard - at scale, and the 2.75%+ that CC companies charge is going to have to creep into mainstream cybercurrency transaction schemes as well to cover practical costs of fraud, customer service and investor dividends in the real world.
Futures. And options. Particularly the ability to sell short without a position in the underlying asset (naked shorts).
Options allow an investor to effectively buy an insurance policy on the movement of an asset's price. A short position is a bet that your asset will go down. You cover yourself against the losses. Like buying insurance on your house. But if you don't own the underlying asset (or didn't borrow it), it's like your neighbor buying insurance on your house. If enough of your neighbors do this, I'll guarantee that your house will burn down sooner or later. It's what happened to mortgage backed securities in 2008.
The SEC tried to put a stop to that. But given a brand new asset class that they really don't understand or can't track, expect antics to ensue. Once the shit stops hitting the fan, expect the SEC to move to register and regulate Bitcoin and it's trading. And then it's allure will be gone.
Have gnu, will travel.
Coins are not lost if the transaction isn't processed. The sender still owns the coins until the public distributed ledger says otherwise, which it won't until the transaction is confirmed and included in the block chain. The protocol has a "replace-by-fee" (RBF) where you can just re-create a new transaction with a higher fee than the old unconfirmed transaction and the new transaction, once confirmed, becomes the fate of the sender's coin, and the old transaction, if it ever gets processed, will be rejected as that coin has already been spent.
Great. So I'm a local electronics store. I sell someone a laptop for .1 BTC. Fair deal. That transaction is queued for a few days. He wants to walk out of the store with the laptop today. Either the store takes a huge risk of fraud (or even mistake), or the user can't get what he buys for days. Which is why anyone who thinks this is a workable currency is a fucking idiot.
I still have more fans than freaks. WTF is wrong with you people?
Selling a lot of BTC, quickly, and more importantly reliably, needs the cooperation of bitcoin miners to process your transaction quickly, ahead of others, instead of waiting until... whenever.
So, look who processed all those BTC sale transactions and how they are connected with the sellers.
Clearly, BTC trading benefits from insiders because it is so illiquid.
"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled"
Four things happened starting on Tuesday. Coinbase added BCH, margin accounts and interest became unsustainable, margin calls, exit strategies.
Coinbase added support for Bitcoin Cash on Tuesday. They also gave everyone 1 BCH for each BTC you had at the time of the split. This should have flooded the market with BCH and driven the price of BCH down. Also the sellers of BCH should have invested in other currencies and pushed those prices up. The opposite happened. News that coinbase was accepting BCH actually pushed BCH's price up and the shift to BCH caused other currencies to fall.
Most of the trading is now automated trading. You can also buy on margin. However the margin has a 1.5% interest per day. Then funny things happen. If someone borrows 1 BTC and shorts it, and then buys an equivalent amount of 10 other more volatile coins using that money they could cover the interest. For the past 2 months this worked really well. Most smaller cap currencies have gone up more than BTC by more than 1.5%. It seemed like low risk investing. People treat crypto like the stock markets treat stocks assuming that having 100 different stocks has less variability than 1. Unfortunately like the stock market, there is a high level of correlation in price change.
Now after Tuesday, people who had margin accounts had to top up their margins. This caused a slow sell but the interest rates made borrowing for more than 3 days difficult so starting late last night a lot of people had no choice but to sell.
Exit strategies - eventually everyone has to actually use their money. I know a lot of people who have made 10x their investment. Their exit has been if it falls 30%, I sell 50%. So if they put in 100K, they had 1M yesterday, 700K this morning and then sold to have 350K in fiat and 350K still in crypto. You can automate that sell.
The weird part. There are no natural sellers in crypto currencies. They aren't backed in any meaningful way anymore. After this crash all the remaining people who own crypto are non-sellers. They are greedy and will hold indefinitely. The margin people who had to sell are gone, my friends with exit strategies are out. The only sellers left are people who are moving money between crypto currencies. The prices of most currencies not in the top 10 market cap are going to jump 15% before the day is done. In a week the money will be poring back in and zero money will be being pulled out.
The reason has been known for hundreds of years.
But we will never learn that a bubble is a bubble is a bubble.
Bitcoin is a bit of technology/algorithms that would be useful if it weren't so cumbersome. There are better, more recent, solutions for the same problem, and Bitcoin will fall by the wayside.
In the meantime, none of these things are actual currencies. It's just people playing chicken pretending there's something to back the "currency" and passing the hot-potato along until somebody gets stuck with it.
Some day, governments or others that can act as a store of wealth may use similar technology.
> Pork bellies have an intrinsic value. It's food. You can eat it. That gives it a value. Bitcoins, not so much.
Why do we all have to sound like hungry orcs here? Does the internet have intrinsic value? You cant eat it, can you ?
And why do you think intrinsic value a good thing for money to have ? It turns out bacon does not make a great currency system.