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."

Comments

Bagholders, start selling!

[Fnkmaster]

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.

Re:Bagholders, start selling!

[Fnkmaster]

What I said was nobody wants to use it as currency. There are plenty of people who want to buy it and sell it as speculators. They are just betting that there is a greater fool down the road.

Equities actually represent a claim to a potential future income stream. Some may be very boring and predictable, some may be super speculative and risky - but there is some meaning to them.

Gold and oil have value as commodities because there are alternative uses of these commodities. So yeah, there is plenty of speculation, but you can take gold or oil and "do stuff" with it.

Bitcoin is an investment asset without any meaning sincere there is still no alternate use. Currency use has vanished to near zero while speculation, hoarding, and cybercrime make up essentially all of the transactions.

Re:it is known why

[MangoCats]

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.

Re:Maybe it has something to do with the 4 day wai

[AuMatar]

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.

Rapid trading needs a miner insider

[nicolaiplum]

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.