The sooner all this nonsense ends the better, too many people have already been scammed for waayyyyy too much money.
And I personally know five or six people who are trying to start their own coins around <insert any noun> and "make billions". They all seem to think their coin will replace all currencies and commodities forever.
It's the perfect fictional scam for our fictional times.
I completely forgot about that, I've been sitting on a 970 for years now, I stopped checking prices for video cards early last year and haven't even thought about it in months.
It's quite bizarre to effectively be unable to upgrade your computer for a year or two. I had forgotten how regular that process was for me.
AFAICT graphics card prices are dipping a little right now, but at least part of that is fairly strong anticipation of nvidia announcing a new generation in a few days. Guess we'll see....
As someone who is also on a 970, and was tied into the regular upgrade cycle, it has actually been good for me. I have noticed I spend a lot less time reading up about new parts and chasing minor %s. I also think it's made my wife a lot happier haha.
Proof of stake has issues too I believe, such as the big getting bigger, "not at stake", etc. I agree it's a shame the work in bitcoin etc is useless for everything besides securing the blockchain, though.
Yes! I haven't had a gaming PC for a while. Been looking for GTX1080 for an ITX case, but ... it appeared that small form factor graphic cards were particularly popular among those miner guys
I think I will take GTX1170 once it out there. People expect 1080 baseline performance at a saner power budget.
They might even crash the second hand market at least if mining becomes unprofitable. Some people have tens or hundreds of good GPUs. I'm still running one of the AMD combined CPU/GPU things since all the good cards were ridiculous when I bought the PC. Looking forward to grabbing one of the nicer cards from the altcoin mines for $200
One of the funny things in this bust (since Jan) is that the volume of money going in to the market has gone way down but more ICOs are launching than ever. I think rather than issuing 100 million tokens and selling 50 million for a dollar in the boom, people are now issuing a billion tokens but only selling 50 to their mates. I guess it means you can call yourself a billionaire in a rather delusional way.
As someone who does have a large investment in it. I'm genuinely happy that's happening.
Way too much marketing + pump-n-dumpness occurring for anyone to make some real solutions out of the blockchain. Maybe now that the fervor has resided, the quiet minds can get to work.
Bitcoin is surprisingly resilient; getting to the last bubble would imply running out of dumb retail investor money. Plus the darknets and ransomware seem still to be in business with cryptocurrency.
I'd expect repeating smaller bubbles every few months.
The question to ask is where will the money come from? The last bubble was all over TV, it was a constant part of the news cycle and everybody knows somebody who bought at least some crypto currency based on promises of wild riches. Most of those people have lost at least some (or even most) of the money they “invested”. When the layman has already been burned, where can money come from?
People often make the mistakes more than once so perhaps there’s room for “this time it’s different!” but I’m not convinced. I don’t see the crypto market ever exceeding the previous all time high.
There’s certainly room for individual cryptocurrency projects to succeed from their own merit as projects that happen to be crypto currencies so I don’t think all crypto currencies are dead forever but crypto as a growth market almost certainly is.
Wall Street wants to trust it's money to miners in China? The whole mining concept is ridiculous, but they have probably done stupider things so it could happen.
The latest Trace Mayer podcast is worth a listen: "Wall Street veteran Caitlin Long discusses the sixth network effect of financialization with Wall Street and institutional investors." https://www.bitcoin.kn/
I agree, I think the last bubble was when everyone was talking about it. Everyone wanted a piece and people were buying bitcoin hearing about the massive gains. I guess that's when the whales took profit.
The focus now by the whales to broaden the ~~sucker~~ buyer base via the ETF's.
The blockchain buzz has also been correlated to the bitcoin price. Both seem to have gone done.
It could be a little of both additional supplies of late-to-the-party money have finally found their way to this market, amplified by the ongoing process of coin concentration into fewer and fewer hands. Both factors (with a little help from breakage and block reward subsidy tail-off schedules) constrain liquidity and thus drive up the price. But it makes for a very distorted "market cap." Fiction, leavened by just enough fact, feeds an eager fantasy, which feeds back into more fiction. Last one out the door gets to hold the very real bags.
I think this bubble was different and rather like the 1999/2000 dot com bubble. Some real companies like Google and Facebook rose from the rubble but the situation where any stupid thing with .com on the name could float for a fortune never returned. I imagine crypto will play out something like that with the stupid ICOs gone but some real stuff of value coming about. I'm guessing bitcoin is like Yahoo - it will continue but the flaws will do for it eventually.
I will also be glad when this craptocurrency nonsense is done. It was never meant to be a long term investment or to be used in the way people are trying to use it.
Once people stop thinking it's a cash crop maybe cryptocurrency can start being useful again.
"Bitcoin could be on the verge of breaking through as a mainstream currency. At least that’s the goal of a startup that is soon to be launched by one of the most powerful players on Wall Street, with backing from some of America’s leading companies.
This morning Intercontinental Exchange—the trading colossus that owns the New York Stock Exchange and other global marketplaces—announced that it is forming a new company called Bakkt. The new venture, which is expected to launch in November, will offer a federally regulated market for Bitcoin. With the creation of Bakkt, ICE aims to transform Bitcoin into a trusted global currency with broad usage."
>Bakkt plans to offer a full package combining a major CFTC-regulated exchange with CFTC-regulated clearing and custody, pending the approval from the commission and other regulators.
I think that they're about the 4th "major player" to announce they're going to introduce a regulated exchange. And every other time it's been "pending regulator approval". And every other time the regulators told them to pound sand. Besides the fact they run the NYSE, what's changed? The US has absolutely no incentive to hand over controls of their monetary policy, and I see no reason why they'd be anymore eager to approve this.
> The US has absolutely no incentive to hand over controls of their monetary policy
The regulators who approve these proposals have nothing to do with monetary policy. Their concern is with the breathtaking volume of scams in the space.
Given that one of the fundamental objectives of the cryptocurrency movement is to devolve the power of monetary policy, issuance and supply leverage from the state to various 'decentralized' (weasel word of this century) groups, and thereby deprive the state of its power of taxation, I would think it in the interest of these regulators to pass the word along to those who do control monetary policy.
> one of the fundamental objectives of the cryptocurrency movement is to devolve the power of monetary policy
Nobody at FINRA or the SEC cares about the power of monetary policy. The former being an industry group, it is actually somewhat in favor of letting banks sell Bitcoin (and related derivatives) to their clients. The people at the Federal Reserve, who actually control monetary policy, are mostly ignoring all this.
> Are FINRA truly 'regulators' (with access to state enforcement apparatus)
Pretty much. FINRA writes rules that everyone in the industry has to follow. When you work in securities, you agree to hand FINRA arbitration power over a lot of things. They can fine you and bar you from the industry. They can't press criminal charges, but neither can the SEC.
You still have the ability to put your BTC in a cold wallet and "transfer" it internationally without physically moving anything. I think there is value in that.
"Still, anyone expecting Bitcoin to provide a haven from turbulence in global markets will have been disappointed."
No judgment on the future of cryptocurrencies (I'm not prescient), but wouldn't you have to be incredibly naive to think that bitcoin or ethereum would be stable, either in the long or short term? If nothing else, this is a space that is so new that a lot of countries haven't even had time to figure out how to legislate around it.
It had been one of the cryptocurrency promoters' talking points for some time.
BTC and Ether were supposed to be a store of value, and some pointed to research that showed a lack of correlation between general market movements and valuations in the cryptocurrency space, arguing that this made it a good hedge.
The extreme volatility would seem to count against that idea though.
The volatility isn't a problem if crypto is a small part of a diversified portfolio, though. In theory, if a portfolio has many small investments in volatile but uncorrelated assets, the overall portfolio won't be volatile. I haven't done any empirical analysis, but I wouldn't be surprised if investing 1-2% of a portfolio in crypto actually reduced its risk.
Bitcoin has held up quite well - down only about 13% over the last week but ETH is down about 35% and a lot of the ICO tokens are very low.
I started crypto speculating in October 17 and have been at it until a month or so but have stopped and sold out because there just doesn't seem much buying going on at the moment. I think people have kind of given up. Bitcoin I think is different because it seems kind of manipulated with the price held up by the Chinese miners or the Tether folk or similar.
Indeed, I get so confused when seeing headlines like this, then I log into my kraken account (I only have like $100 worth of bitcoins but it's fun) to see what's up, and I see a graph like this https://i.imgur.com/kVW7XYx.png which basically just shows that it's "plummeted" back to the same level it was a month ago, which it was at for two months.. I don't see a reason to sell.
I originally bought bitcoin when they were $12, so when I see the articles about how much value it's losing my reaction is just kind of... well, it's still 100x higher than it was 5 years ago, and 10x than 2 years ago..
Anyways if you look at the global trend https://i.imgur.com/1w1X5bN.png I would say that the rate of falling from its ridiculous speculative high last year is decreasing, so maybe it's flattening out for a while..
The argument is that Bitcoin is still in a lower lows, lower highs move. That a sustainable bottom has not been put in yet, rather than that it's just bouncing around a bit. I.e. this move will breach below $5,774 and continue further down.
Funny how many financial headings are needlessly alarmist, using words like "panic", "plummet", "scare", "sharp". They look made more for scaring the masses than actually inform.
This also happens with currency exchange rates, at least here in Mexico. Some times every news outlet reports a 15 cent slide as "the peso plummeting", seemingly inciting people to buy US dollars. Then, after a week or two, the exchange rate is not important anymore.
I'm still waiting for the environmentalists to start going after the miners who seek out cheap energy and then gobble up tons of it just mine their crypto:
Today, a half-megawatt mine, Miehe says, “is nothing.” The commercial miners now pouring into the valley are building sites with tens of thousands of servers and electrical loads of as much as 30 megawatts, or enough to power a neighborhood of 13,000 homes. And in the arms race that cryptocurrency mining has become, even these operations will soon be considered small-scale.
At least some people like bitcoin/etc, who likes the new reddit layout that requires transferring 60x more data than necessary (using HN is an example of an environmentally friendly text-based site) just to track all their users clicks and mouse movements?
The utility of using half a megawatt of power for something else would be a reasonable comparison. That's the power required for ~300 average sized homes. That sounds like a lot to me.
It sounds like a lot because you are adding up energy used by many, many people all around the world. Lots of things "sound like a lot" when you do that.
Why not do the same calculation for a few other things that people enjoy (gaming, porn, cat pics, posting to facebook/twitter, bars/drinking, holiday decorations, lawncare, etc)?
All those activities are totally unnecessary wastes of energy.
Typically when you think of "investment", you are exchanging resources (typically money) for some sort of increased or improved production capacity. For example, buying a new truck so you can increase delivery capacity, or buying a new machine so you can produce more things faster.
Speculation, which is a very, very, very high percentage of all crypto transactions, is merely buying some asset with the intent of selling it later at a higher price. There's a name for this, the "Greater Fool Theory", which is so called because you hope somebody else will buy at a higher price and you won't be the fool holding it when the price declines.
It should be noted that buying stocks on the open market is more akin to speculation than investment, although historically it has provided fairly reliable returns in the aggregate over the long term. It also has the effect of providing liquidity for original investors, so that they can take their gains and invest again elsewhere, which is a trait crypto doesn't necessarily share.
Could be tied into "$usd strength" narrative. As historically there has been a correlation between EM currency market weakness and crypto flight to safety. Such was the case with Greece and Spain. But now with Turkey, South Africa, and others seeing 5% moves per day. That correlation seems to be broken in favor of the Almighty Dollar. Be careful out there. August volatility can be especially fraught in illiquid markets as traders are away from their desks and out on the beaches in East Hampton ;)
> “Most cryptocurrencies have been overvalued for a very long time,” said Samson Mow, chief strategy officer at blockchain developer Blockstream Corp.
This reminds me of the "Not Even Wrong" attribute of String Theory. How can something be overvalued, if it's only value is derived from the price people are willing to pay for it?
> You could say the same thing about any currency, future or derivative
Not really. Derivatives have intrinsic values. There are fundamental properties that push their prices into certain equilibria. Currencies are more complicated. But between interest rates, which all modern currencies natively support, and characteristics of the underlying economy, here too one can derive boundaries.
Cryptocurrencies don't have this because (a) they don't natively support rates and (b) have a poorly-defined exclusive economic base (if it exists at all). So you end up with a number that jolts around pretty much purely on animal spirits.
If this is Samson Mow, a well-known so called 'bitcoin maximalist', he most likely means most cryptocurrencies except Bitcoin have been overvalued. These guys always make a special exception for bitcoin when talking about the many downsides and over hyped value of cryptocurrencies.
You are correct but I think this perspective is simply shorthand for "A lot of (self-described) smart people think that X" and in this case X is crypto overvalued. It is also text you find mostly when people are looking back in time.
You can actually make some sort of value arguments for some of the stuff. For example with bitcoin you can use the mining cost, or relate the value of the coins to the volume of transactions done using it. A consultancy called Quinlan did that and came up with about $1,800 as a value for bitcoin based on the current usage.
http://uk.businessinsider.com/bitcoin-price-to-tank-further-...
The mining cost shouldn't really have any bearing though - mining cost follows from market valuation, not the other way round. If the market goes up, it becomes more profitable to mine, more people start to mine, the mining cost rises to meet the new value.
But there's no feedback to the market if, for instance, power prices go up and mining becomes more expensive. The least efficient miners must simply either mine at a loss, or drop off until difficulty readjusts downward and those who are left are back in profit. More expensive power wouldn't affect the market price of a bitcoin.
--edit-- Because it doesn't affect the supply, the same number are created either way.
> More expensive power wouldn't affect the market price of a bitcoin
This seems intuitively wrong. Production and marginal costs are always factors.
If power goes up in value, it becomes more expensive to produce new Bitcoins as well as process transactions. That would feed into prices, fees and usage. The strength of this signal might be obscured by noise, but that doesn't mean it isn't there.
> If power goes up in value, it becomes more expensive to produce new Bitcoins as well as process transactions.
No it doesn't, because the number of bitcoins produced is a constant regardless of price, and they can only be sold at market price. If people stop mining because it costs too much, the supply to the market is entirely unaffected.
The cost of power has absolutely no bearing on the transaction fees or the transaction processing capabilities of the network either. Only congestion affects transaction costs, and the transaction capacity of the network is not connected to the number of miners online or the hash rate, it is roughly constant and dependent on protocol factors.
--edit--
- Replying to the child post here as I am rate limited :(
> If power costs go up 10x, the cost of operating the rigs that verify transactions goes up. Miners who find processing transactions unprofitable will remove themselves from the system
If those miners remove themselves, it has no bearing on the rate at which transactions can be processed or the price of a transaction.
They are all trying to validate the same transactions in parallel. The network does not get more capable as you add mining capacity.
> until transaction fees rise to a level that pays the bill.
What mechanism would cause the fees to rise?
(--edit-- last edit - I think what you're missing is that as the number of miners decreases, each miner gets a bigger share of block rewards and fees)
> The cost of power has absolutely no bearing on the transaction fees
If power costs go up 10x, the cost of operating the rigs that verify transactions goes up. Miners who find processing transactions unprofitable will remove themselves from the system until transaction fees rise to a level that pays the bill.
Indeed it actually may help lower the noise floor, as it would expose (through unusually precise, if idiosyncratic electron-counting metrics) the real cost of power expressed by inputs from both the acknowledged market, and the unacknowledged market.
> If power goes up in value, it becomes more expensive to produce new Bitcoins as well as process transactions.
Difficulty is adjusted every 2016 blocks based on the timing of previous blocks. So in the long term, the rate of block creation stays constant, averaging 1 block per 10 minutes.
> in the long term, the rate of block creation stays constant
Consider Bitcoin if there were a single miner running a single rig. They sink costs into the rig, and then run it, paying for electricity as it hums. The rig has to produce at least as much income to this miner as she pays out in electricity costs. Otherwise, it's more profitable to turn it off. So if electricity prices go up, income has to as well. If it doesn't, the rig goes off. This is fundamental to profit being equal to revenue minus costs.
In a networked state, there are more interaction effects but the fundamental relationship holds. Every miner must pay, directly or indirectly, their electricity costs. (More than that, every user has to pay electricity costs. If electricity prices skyrocketed, an electronic currency--whether digital dollars or Bitcoin--becomes fundamentally uncompetitive relative to paper.)
Constant-rate production dampens this effect, but does not remove it. At the end of the day, somebody is paying for the electricity the network consumes. Those somebodies aren't doing it for free.
The thing is that the act of mining isn't actually providing any value, it just proves that you have wasted some amount of processing power. This is called proof of work and is a system set in place so that bad actors can't take control of the ledger without spending a large amount of money. The threshold for how much work you need to put in is adjusted automatically. If there was just a single machine in the system they could choose to mine very slowly and the system would eventually reach a very easy threshold.
What that means is that the threshold would be about ten times lower if electricity prices were ten times higher globally.
As you can understand, this is a big big waste - which is why alternatives to proof of work are researched heavily.
> What that means is that the threshold would be about ten times lower if electricity prices were ten times higher globally
This change in threshold would flow into pricing. Also, energy costs are a factor in equipment costs, network access costs and the cost to end users. One would be hard pressed to find a single priced good or service on this planet that doesn't respond to energy prices.
> One would be hard pressed to find a single priced good or service on this planet that doesn't respond to energy prices.
You don't have to look further than Bitcoin. The cost of producing Bitcoin is primarily the cost of wasted energy - how much energy should be wasted is determined algorithmically. Too low and you get arbitrage opportunities; too high and people stop mining.
Bitcoin pricing is not at all related to energy prices in the middle-to-long-run.
> So if electricity prices go up, income has to as well. If it doesn't, the rig goes off. This is fundamental to profit being equal to revenue minus costs.
> Every miner must pay, directly or indirectly, their electricity costs.
But they have no mechanism to pass this cost on. There is no change in the levels of production. They cannot increase fees as fees are voluntary and users only set them to improve their processing priority.
If a miner finds that mining is not profitable, they must indeed switch off. The hash rate of the network falls. The remaining miners get a bigger share of the daily block payout. Users though, are entirely unaffected, and so is the open market.
There is literally no mechanism by which mining costs can affect price in BTC. It's the other way around. Price affects the number of miners fighting for a share of the spoils. If it's no longer profitable, they stop. The hashrate drops, those left behind get more of a share.
I'm not sure how else I can explain this to you - the cost of mining cannot add value to the system (other than securing it) because there is no mechanism to pass on higher fees, the supply is unaffected by the number of miners, the transaction speeds are unaffected by the number of miners... there's a complete disconnect in that direction.
When bitcoin started there was basically one computer mining and the difficulty level reflected that and the cost of a bitcoin was less than a cent.
Now that there is billions of dollars worth of hardware dedicated to mining, the difficulty level goes up until the rate of block creation is one every 10 minutes. But now the 12.5 bitcoin reward every 10 min has to support billions in capital investment hence the price needed being higher, of the order of $2000. I guess if the price fell well below that to say $100 then there would be a lot of mining hardware repurposed or sold on eBay and we could get cheap graphics cards again.
re The speed of transactions? The price of transactions? The creation of new coins?
> what is affected by the mining capacity? The speed of transactions? The price of transactions? The creation of new coins?
None of the above. More miners means more people splitting the block rewards, and more network security against 51% attacks. Literally nothing else is affected.
It costs $62M to put 22,800KG into LEO with Falcon 9. But if all I'm sending up is a block of concrete, that isn't going to have much monetary value to anyone. Indeed, it might have negative value (particularly if, when it drops out of orbit, it lands on someone's house).
Well not directly but if someone pays $62M to put something into LEO you can guess its worth $62M+ to them at any rate. I'm not sure if that applies to bitcoin.
> How can something be overvalued, if it's only value is derived from the price people are willing to pay for it?
Usually when someone's saying something is overvalued, what they mean is that they think there is good reason to believe that what people are willing to pay for it now is significantly more than what they think people will be willing to pay for it at some undefined point in the future. Or, in a nutshell, that they think it's a fad.
I think it's generally a fairly safe bet to assume that, when there's a buying rush on something, the market price will end up being quite a bit higher than what it will be once things start to stabilize. That's a fairly intuitive implication of supply and demand, and I think the only real way around it is if there's some other force that's constantly working to push the price up. For example, the price of land tends to appreciate because the supply of land is approximately constant, but the number of people who want land is always growing.
Bitcoin maybe has that with its deflationary design. But a counterweight to that feature is that nobody really needs Bitcoin for anything. So, like land, the supply is pinned, but, unlike land, it's entirely possible for demand to plummet all the way to zero.
Take the US real estate market in 2007: You could argue that, hindsight, it was overvalued if you needed to be worried about what it would be worth 2 years later, but, 10 years later, prices were even higher.
Might also be different values to different people if they have differing levels of ability to exploit it. But, in the narrow case of cryptocurrency, I'm pretty sure it's (currently) got very little value outside of its exchange rate.
> Usually when someone's saying something is overvalued, what they mean is that they think there is good reason to believe that what people are willing to pay for it now is significantly more than what they think people will be willing to pay for it at some undefined point in the future
This is a mis-understanding of the term "value," at least in the context of investing. Value is the benefit you receive from holding an asset. If you buy an undervalued bond, the interest and maturity should pay you more than the price you paid for it. Same with stocks and dividends, derivatives and cash flows, et cetera.
Currencies seem like an exception until you consider how FX traders make money. Currencies give you access to borrowing and lending in their respective economies. Their relative values are enforced by market factors like the carry trade. Bitcoin doesn't have this because, like gold, it does not natively support interest rates.
They hold some minimum value in that common stock holders are entitled to a share of the liquidation value of the company, should it go under.
That said, they're (usually, at least) in line behind bond holders, and most companies are trading a high multiple of their liquidation value these days, and companies tend to take on a lot of debt right before they go under, so to a reasonable approximation, the amount of that value that a common stock holder can expect to see is 0.
> unlike land, it's entirely possible for demand to plummet all the way to zero.
Not really the point, but land can clearly go to zero [0] (and below). Just ask St. Louis or its peer cities how well their giant land banks are working out.
[0] "Zero" here means the land is worth less than whatever amount justifies the obligations that come with owning it (e.g. taxes, maintenance, etc).
I think a lot of confusion stems from conflating "value" and "price". Bitcoin has no intrinsic value. To be fair, neither does a dollar (but nobody's suggesting investing in dollars is a good idea, so that's another subject).
Things with intrinsic value (aka things that produce cash flow, like stocks, bonds, real estate, etc.) can be somewhat rationally priced based on their expected returns & risk profiles. Things without intrinsic value (gold, bitcoin, beanie babies, etc.) are priced primarily by speculation. BUT, gold, for example, has a built-in floor and ceiling price: since it's useful for electronics and medical purposes, its price cannot go to 0. Similarly, if the price gets high enough, mining becomes profitable, increasing supply, driving the price back down. Being a non-physical thing, Bitcoin has neither of these mechanisms, so its price can, as we've seen, flail around bounded only by investor greed.
This is the correct answer. Anything that has a use to someone has intrinsic value. The price is what they offer to pay in hopes of convincing the current owner to give it to them.
The notion of intrinsic value was abandoned by economists more than a hundred years ago. In modern economics, value is subjective. Market prices simply reflect the value individuals place on goods and services.
Sometimes market prices reflect the value some individuals think other individuals will place on things. Which leads back to how something can be over/under-valued.
That statement is false for a number of reasons, among which the fact that the US taxpayers have to pay their taxes in dollars and thus the value of a dollar is pegged to the value of the average worker's anual income.
Good. Serves them right for making the layman more likely to associate "crpyto" with get-rich-quick schemes rather than important privacy-protecting technology.
I never understood the privacy point either. crypto technology to me seems like the opposite of privacy respecting. The entire ledger is public, so all my transactions are public and traceable through history. If someone ever figures out which wallet belongs to me, I'm done for, which is a horrible single point of failure.
The same thing for smart contracts really, by advertising them as doing away with trust and middlemen and calling it a feature, they are demanding that key parts of transactions are made public, traceable and constantly measured.
All of it seems to me panopticon like rather than focused on privacy. It has obfuscated the only good thing (the identity of the person I buy from, which I care about), and made transparent all the bad things (my and their personal history)
112 comments
[ 2.6 ms ] story [ 173 ms ] threadAnd I personally know five or six people who are trying to start their own coins around <insert any noun> and "make billions". They all seem to think their coin will replace all currencies and commodities forever.
It's the perfect fictional scam for our fictional times.
It's quite bizarre to effectively be unable to upgrade your computer for a year or two. I had forgotten how regular that process was for me.
https://www.nasdaq.com/press-release/nvidia-unveils-quadro-r...
https://www.nvidia.com/en-us/geforce/news/geforce-gaming-cel...
Mining is a massive waste of resources, and isn't very effective at decentralizing the network.
Yes! I haven't had a gaming PC for a while. Been looking for GTX1080 for an ITX case, but ... it appeared that small form factor graphic cards were particularly popular among those miner guys
I think I will take GTX1170 once it out there. People expect 1080 baseline performance at a saner power budget.
Way too much marketing + pump-n-dumpness occurring for anyone to make some real solutions out of the blockchain. Maybe now that the fervor has resided, the quiet minds can get to work.
Does HN think it's the last one, or will the pattern repeat in a few years again?
I'd expect repeating smaller bubbles every few months.
People often make the mistakes more than once so perhaps there’s room for “this time it’s different!” but I’m not convinced. I don’t see the crypto market ever exceeding the previous all time high.
There’s certainly room for individual cryptocurrency projects to succeed from their own merit as projects that happen to be crypto currencies so I don’t think all crypto currencies are dead forever but crypto as a growth market almost certainly is.
Also Bitmain is basically insolvent.
No, but it will happily take a commission selling you a Bitcoin or Bitcoin derivative.
The focus now by the whales to broaden the ~~sucker~~ buyer base via the ETF's.
The blockchain buzz has also been correlated to the bitcoin price. Both seem to have gone done.
Once people stop thinking it's a cash crop maybe cryptocurrency can start being useful again.
This morning Intercontinental Exchange—the trading colossus that owns the New York Stock Exchange and other global marketplaces—announced that it is forming a new company called Bakkt. The new venture, which is expected to launch in November, will offer a federally regulated market for Bitcoin. With the creation of Bakkt, ICE aims to transform Bitcoin into a trusted global currency with broad usage."
http://fortune.com/longform/nyse-owner-bitcoin-exchange-star...
So, you guys really think this doesn't matter? A bit one-sided imo.
I think that they're about the 4th "major player" to announce they're going to introduce a regulated exchange. And every other time it's been "pending regulator approval". And every other time the regulators told them to pound sand. Besides the fact they run the NYSE, what's changed? The US has absolutely no incentive to hand over controls of their monetary policy, and I see no reason why they'd be anymore eager to approve this.
The regulators who approve these proposals have nothing to do with monetary policy. Their concern is with the breathtaking volume of scams in the space.
Nobody at FINRA or the SEC cares about the power of monetary policy. The former being an industry group, it is actually somewhat in favor of letting banks sell Bitcoin (and related derivatives) to their clients. The people at the Federal Reserve, who actually control monetary policy, are mostly ignoring all this.
Pretty much. FINRA writes rules that everyone in the industry has to follow. When you work in securities, you agree to hand FINRA arbitration power over a lot of things. They can fine you and bar you from the industry. They can't press criminal charges, but neither can the SEC.
No judgment on the future of cryptocurrencies (I'm not prescient), but wouldn't you have to be incredibly naive to think that bitcoin or ethereum would be stable, either in the long or short term? If nothing else, this is a space that is so new that a lot of countries haven't even had time to figure out how to legislate around it.
BTC and Ether were supposed to be a store of value, and some pointed to research that showed a lack of correlation between general market movements and valuations in the cryptocurrency space, arguing that this made it a good hedge.
The extreme volatility would seem to count against that idea though.
Seeing a 5% movement in the market and giving it a title 'Sense of Panic' is not really great journalism in my opinion.
I started crypto speculating in October 17 and have been at it until a month or so but have stopped and sold out because there just doesn't seem much buying going on at the moment. I think people have kind of given up. Bitcoin I think is different because it seems kind of manipulated with the price held up by the Chinese miners or the Tether folk or similar.
I originally bought bitcoin when they were $12, so when I see the articles about how much value it's losing my reaction is just kind of... well, it's still 100x higher than it was 5 years ago, and 10x than 2 years ago..
Anyways if you look at the global trend https://i.imgur.com/1w1X5bN.png I would say that the rate of falling from its ridiculous speculative high last year is decreasing, so maybe it's flattening out for a while..
This also happens with currency exchange rates, at least here in Mexico. Some times every news outlet reports a 15 cent slide as "the peso plummeting", seemingly inciting people to buy US dollars. Then, after a week or two, the exchange rate is not important anymore.
Every time an article like this comes out, crypto shoots up shortly after. It's like a perfect negative signal.
And how could it be otherwise? The worst time to buy is when everyone else is buying.
It's also when everyone is selling. Nothing says this can't go lower.
Surely these articles are click baits at this point.
The lowest level since June? 2018? That's a few weeks ago... Why is this even a news?
https://www.politico.com/magazine/story/2018/03/09/bitcoin-m...
Today, a half-megawatt mine, Miehe says, “is nothing.” The commercial miners now pouring into the valley are building sites with tens of thousands of servers and electrical loads of as much as 30 megawatts, or enough to power a neighborhood of 13,000 homes. And in the arms race that cryptocurrency mining has become, even these operations will soon be considered small-scale.
That is INSANE.
Is it? What have you compared that to?
At least some people like bitcoin/etc, who likes the new reddit layout that requires transferring 60x more data than necessary (using HN is an example of an environmentally friendly text-based site) just to track all their users clicks and mouse movements?
https://news.ycombinator.com/item?id=17671695
The utility of using half a megawatt of power for something else would be a reasonable comparison. That's the power required for ~300 average sized homes. That sounds like a lot to me.
It sounds like a lot because you are adding up energy used by many, many people all around the world. Lots of things "sound like a lot" when you do that.
Why not do the same calculation for a few other things that people enjoy (gaming, porn, cat pics, posting to facebook/twitter, bars/drinking, holiday decorations, lawncare, etc)?
All those activities are totally unnecessary wastes of energy.
Speculation, which is a very, very, very high percentage of all crypto transactions, is merely buying some asset with the intent of selling it later at a higher price. There's a name for this, the "Greater Fool Theory", which is so called because you hope somebody else will buy at a higher price and you won't be the fool holding it when the price declines.
It should be noted that buying stocks on the open market is more akin to speculation than investment, although historically it has provided fairly reliable returns in the aggregate over the long term. It also has the effect of providing liquidity for original investors, so that they can take their gains and invest again elsewhere, which is a trait crypto doesn't necessarily share.
This reminds me of the "Not Even Wrong" attribute of String Theory. How can something be overvalued, if it's only value is derived from the price people are willing to pay for it?
You could say the same thing about any currency, future or derivative.
Not really. Derivatives have intrinsic values. There are fundamental properties that push their prices into certain equilibria. Currencies are more complicated. But between interest rates, which all modern currencies natively support, and characteristics of the underlying economy, here too one can derive boundaries.
Cryptocurrencies don't have this because (a) they don't natively support rates and (b) have a poorly-defined exclusive economic base (if it exists at all). So you end up with a number that jolts around pretty much purely on animal spirits.
It can be overvalued if the transaction volume reduces, even if it the price doesn't reduce much.
Some things will sell more if the price goes down, some others won't.
But there's no feedback to the market if, for instance, power prices go up and mining becomes more expensive. The least efficient miners must simply either mine at a loss, or drop off until difficulty readjusts downward and those who are left are back in profit. More expensive power wouldn't affect the market price of a bitcoin.
--edit-- Because it doesn't affect the supply, the same number are created either way.
This seems intuitively wrong. Production and marginal costs are always factors.
If power goes up in value, it becomes more expensive to produce new Bitcoins as well as process transactions. That would feed into prices, fees and usage. The strength of this signal might be obscured by noise, but that doesn't mean it isn't there.
But it's still correct - there is no link there.
> If power goes up in value, it becomes more expensive to produce new Bitcoins as well as process transactions.
No it doesn't, because the number of bitcoins produced is a constant regardless of price, and they can only be sold at market price. If people stop mining because it costs too much, the supply to the market is entirely unaffected.
The cost of power has absolutely no bearing on the transaction fees or the transaction processing capabilities of the network either. Only congestion affects transaction costs, and the transaction capacity of the network is not connected to the number of miners online or the hash rate, it is roughly constant and dependent on protocol factors.
--edit-- - Replying to the child post here as I am rate limited :(
> If power costs go up 10x, the cost of operating the rigs that verify transactions goes up. Miners who find processing transactions unprofitable will remove themselves from the system
If those miners remove themselves, it has no bearing on the rate at which transactions can be processed or the price of a transaction.
They are all trying to validate the same transactions in parallel. The network does not get more capable as you add mining capacity.
> until transaction fees rise to a level that pays the bill.
What mechanism would cause the fees to rise?
(--edit-- last edit - I think what you're missing is that as the number of miners decreases, each miner gets a bigger share of block rewards and fees)
If power costs go up 10x, the cost of operating the rigs that verify transactions goes up. Miners who find processing transactions unprofitable will remove themselves from the system until transaction fees rise to a level that pays the bill.
There will be some short term effects as you describe until the difficulty adjusts.
Difficulty is adjusted every 2016 blocks based on the timing of previous blocks. So in the long term, the rate of block creation stays constant, averaging 1 block per 10 minutes.
Consider Bitcoin if there were a single miner running a single rig. They sink costs into the rig, and then run it, paying for electricity as it hums. The rig has to produce at least as much income to this miner as she pays out in electricity costs. Otherwise, it's more profitable to turn it off. So if electricity prices go up, income has to as well. If it doesn't, the rig goes off. This is fundamental to profit being equal to revenue minus costs.
In a networked state, there are more interaction effects but the fundamental relationship holds. Every miner must pay, directly or indirectly, their electricity costs. (More than that, every user has to pay electricity costs. If electricity prices skyrocketed, an electronic currency--whether digital dollars or Bitcoin--becomes fundamentally uncompetitive relative to paper.)
Constant-rate production dampens this effect, but does not remove it. At the end of the day, somebody is paying for the electricity the network consumes. Those somebodies aren't doing it for free.
What that means is that the threshold would be about ten times lower if electricity prices were ten times higher globally.
As you can understand, this is a big big waste - which is why alternatives to proof of work are researched heavily.
This change in threshold would flow into pricing. Also, energy costs are a factor in equipment costs, network access costs and the cost to end users. One would be hard pressed to find a single priced good or service on this planet that doesn't respond to energy prices.
You don't have to look further than Bitcoin. The cost of producing Bitcoin is primarily the cost of wasted energy - how much energy should be wasted is determined algorithmically. Too low and you get arbitrage opportunities; too high and people stop mining.
Bitcoin pricing is not at all related to energy prices in the middle-to-long-run.
> Every miner must pay, directly or indirectly, their electricity costs.
But they have no mechanism to pass this cost on. There is no change in the levels of production. They cannot increase fees as fees are voluntary and users only set them to improve their processing priority.
If a miner finds that mining is not profitable, they must indeed switch off. The hash rate of the network falls. The remaining miners get a bigger share of the daily block payout. Users though, are entirely unaffected, and so is the open market.
There is literally no mechanism by which mining costs can affect price in BTC. It's the other way around. Price affects the number of miners fighting for a share of the spoils. If it's no longer profitable, they stop. The hashrate drops, those left behind get more of a share.
I'm not sure how else I can explain this to you - the cost of mining cannot add value to the system (other than securing it) because there is no mechanism to pass on higher fees, the supply is unaffected by the number of miners, the transaction speeds are unaffected by the number of miners... there's a complete disconnect in that direction.
When bitcoin started there was basically one computer mining and the difficulty level reflected that and the cost of a bitcoin was less than a cent.
Now that there is billions of dollars worth of hardware dedicated to mining, the difficulty level goes up until the rate of block creation is one every 10 minutes. But now the 12.5 bitcoin reward every 10 min has to support billions in capital investment hence the price needed being higher, of the order of $2000. I guess if the price fell well below that to say $100 then there would be a lot of mining hardware repurposed or sold on eBay and we could get cheap graphics cards again.
re The speed of transactions? The price of transactions? The creation of new coins?
The speed remains about the same, the price of transactions tends to go up, the creation of new coins is not effected as it is hard coded in the bitcoin software. (https://www.anythingcrypto.com/guides/bitcoin-mining-block-r...)
None of the above. More miners means more people splitting the block rewards, and more network security against 51% attacks. Literally nothing else is affected.
It costs $62M to put 22,800KG into LEO with Falcon 9. But if all I'm sending up is a block of concrete, that isn't going to have much monetary value to anyone. Indeed, it might have negative value (particularly if, when it drops out of orbit, it lands on someone's house).
Usually when someone's saying something is overvalued, what they mean is that they think there is good reason to believe that what people are willing to pay for it now is significantly more than what they think people will be willing to pay for it at some undefined point in the future. Or, in a nutshell, that they think it's a fad.
I think it's generally a fairly safe bet to assume that, when there's a buying rush on something, the market price will end up being quite a bit higher than what it will be once things start to stabilize. That's a fairly intuitive implication of supply and demand, and I think the only real way around it is if there's some other force that's constantly working to push the price up. For example, the price of land tends to appreciate because the supply of land is approximately constant, but the number of people who want land is always growing.
Bitcoin maybe has that with its deflationary design. But a counterweight to that feature is that nobody really needs Bitcoin for anything. So, like land, the supply is pinned, but, unlike land, it's entirely possible for demand to plummet all the way to zero.
Take the US real estate market in 2007: You could argue that, hindsight, it was overvalued if you needed to be worried about what it would be worth 2 years later, but, 10 years later, prices were even higher.
Might also be different values to different people if they have differing levels of ability to exploit it. But, in the narrow case of cryptocurrency, I'm pretty sure it's (currently) got very little value outside of its exchange rate.
This is a mis-understanding of the term "value," at least in the context of investing. Value is the benefit you receive from holding an asset. If you buy an undervalued bond, the interest and maturity should pay you more than the price you paid for it. Same with stocks and dividends, derivatives and cash flows, et cetera.
Currencies seem like an exception until you consider how FX traders make money. Currencies give you access to borrowing and lending in their respective economies. Their relative values are enforced by market factors like the carry trade. Bitcoin doesn't have this because, like gold, it does not natively support interest rates.
That said, they're (usually, at least) in line behind bond holders, and most companies are trading a high multiple of their liquidation value these days, and companies tend to take on a lot of debt right before they go under, so to a reasonable approximation, the amount of that value that a common stock holder can expect to see is 0.
Not really the point, but land can clearly go to zero [0] (and below). Just ask St. Louis or its peer cities how well their giant land banks are working out.
[0] "Zero" here means the land is worth less than whatever amount justifies the obligations that come with owning it (e.g. taxes, maintenance, etc).
Things with intrinsic value (aka things that produce cash flow, like stocks, bonds, real estate, etc.) can be somewhat rationally priced based on their expected returns & risk profiles. Things without intrinsic value (gold, bitcoin, beanie babies, etc.) are priced primarily by speculation. BUT, gold, for example, has a built-in floor and ceiling price: since it's useful for electronics and medical purposes, its price cannot go to 0. Similarly, if the price gets high enough, mining becomes profitable, increasing supply, driving the price back down. Being a non-physical thing, Bitcoin has neither of these mechanisms, so its price can, as we've seen, flail around bounded only by investor greed.
That statement is false for a number of reasons, among which the fact that the US taxpayers have to pay their taxes in dollars and thus the value of a dollar is pegged to the value of the average worker's anual income.
The same thing for smart contracts really, by advertising them as doing away with trust and middlemen and calling it a feature, they are demanding that key parts of transactions are made public, traceable and constantly measured.
All of it seems to me panopticon like rather than focused on privacy. It has obfuscated the only good thing (the identity of the person I buy from, which I care about), and made transparent all the bad things (my and their personal history)