Coinbase is down. It probably isn't helping the situation.
Wow, as I'm typing this now the market is massively recovering. I just saw it go from 600 to 700 in probably 30 seconds. There are a lot of people doing algo trading with bitcoin.
There are a lot of people trying to buy bit coin right now; it's a commodity and people are speculating on it. There is more demand than supply right now IMO.
Completely - this is a very new commodity market upon which lots of people are speculating. I intend to speculate on it and so do (are) many people in the tech and now wider communities.
Worth remembering that at least bitcoin is backed by some value of work, what is USD backed by again? Debt :-D
That debt is backed by the collective work of the citizens of the US. In total, and discounted by the tax rate, this is far, far more work, and of course far more useful work, than Bitcoin mining.
A debt that can never be repaid, so we'll just print an ever increasing amount of cash and sell gold to make sure no-one realises the dollar is worthless?
It is a snarky form of the statement, but basically the idea is that fiat currency is similar to corporate bonds.
If you think General Motors is going to tank, you don't want their bonds, nobody does, they are junk. If Google were to issue a corporate bond series, everyone would eat them up like candy though.
Because the USA is the only remaining military superpower in the world, it's fiat currency is going to be #1 in the world. The Eurozone is #2 militarily, and it isn't a coincidence that the Euro currency is also #2. And places like Zimbabwe have jokes for militaries and jokes for currencies. A few years ago someone gave me a 100,000,000 Zimbabwe note as a gag gift.
1. Bitcoin is not backed by anything. The work that goes into creating Bitcoin via the mining process has no bearing whatsoever on the value or utility of Bitcoin.
2. USD is backed by the law -- laws concerning debts, laws concerning taxes, laws concerning torts, etc. The law is what makes USD useful, which is why USD has value.
You are wrong about point number 1. The purpose of mining is to process and secure bitcoin transactions. The work that goes into mining is what provides the utility of bitcoin. The 25 btc mining reward is just an incentive.
The only surprising thing is how much faster BTC goes through different market phases than other financial instruments. A blow-off, reversal and sell-off like this would take at least days in equities or commodities while this merely took hours. It also appears as if the frequency and amplitude of BTC tops is increasing. This trend actually makes BTC less and less useful as a currency to do business in since you have to hedge your exposure by the hour.
this is what people who do real finance call an illiquid market.
Just to give you an idea, all the BTC in the world today were worth more or less as much as FIAT, which is probably the smallest car company out there.
An illiquid market is fantastically easy to move.. and rig.
It's still such a small market. A single whale can cause a price to fall or rise...a group of whales could "crash" the damned thing for a time. It's also a nerd market. There is algorithmic trading happening at a level that only can happen with firms that have access to the direct feed on the exchanges...BTC allows everyone with enough knowledge to do high frequency trading.
But, every day the size of fluctuations that are possible will become smaller. More people holding BTC, more people buying and selling BTC, leads to less ability of a few buyers or sellers to cause a major change.
Someone in another recent BTC thread joked (in a "ha ha, only serious" kind of way) that the current speculative nature of the market might get enough people buying into BTC as a lottery ticket kind of purchase to cause the tipping point for it being a viable currency to happen without anyone noticing. If 20 million people in the US held Bitcoins...that's a big market for vendors to want to tap into. It's worth a little risk to get those buyers, as well.
"Someone in another recent BTC thread joked (in a "ha ha, only serious" kind of way) that the current speculative nature of the market might get enough people buying into BTC as a lottery ticket kind of purchase to cause the tipping point for it being a viable currency to happen without anyone noticing"
How is that? It sounds like you will have lots of people with Bitcoin holdings. I do not see a currency, because I do not see where anyone is using Bitcoin as a medium of exchange.
Scan QR code with your wallet, hit Send, instadownload. You don't even have to touch the computer. At all. No account creation or anything else necessary.
Now imagine this with... let's say, pornography or poker. Instant gratification.
Amazon "one click" ordering could become Amazon "no click" ordering :)
"It sounds like you will have lots of people with Bitcoin holdings."
Which is all it takes to have lots of people who want to buy things with Bitcoins. Since there's almost zero barrier to doing so, once you have enough vendors accepting Bitcoin, there's little reason not to buy things with Bitcoin.
What I'm getting at is: The influx of millions of new Bitcoin holders will lead to an influx of new vendors accepting Bitcoin. Sure, people are still clinging to bitcoins like gold...wanting to hoard it rather than use it. But, that desire will fade when the market settles down and becomes more predictable.
I'm not really intending to hand-wave it away. I just assumed it would come to pass, based on past evidence (there's more vendors every day, with the pace accelerating). I may be making an incorrect assumption. There are, in fact, a lot of assumptions being made by those who are bullish on Bitcoin, and some or all of them may be wrong. In some cases, if the assumptions are wrong, it will mean the end of Bitcoin. In others, if the assumptions are wrong, it'll just mean Bitcoin is more limited as a currency than we might like.
But, it can't be anything other than a hypothesis until it is tested; neither you, or I, can know how this is gonna play out. Bitcoin isn't quite like anything else that has existed before, including gold or other currencies, so we're all guessing. I've laid out what I think will happen, and a bit about why I think it will happen.
One last point: Gold, precisely unlike Bitcoin, is not easily or cheaply transferable over the Internet. That's a big distinction and, I think, enough to make it clear we're dealing with a different thing entirely. I left it unstated before as I kinda felt it would be obvious to HN readers. But, any time anyone compares Bitcoin to gold or another traditional currency or store of value in a general way (without being specific about how Bitcoin seems to be behaving like that other subject in one way or another), I question the validity of the analogy straight away. I genuinely believe Bitcoin is something new, and new human behaviors will develop around it.
Can somebody with some knowledge about the chinese bank and regulatory system tell me if Bitcoin presents an attractive opportunity for chinese people to buy foreign currency like the Euro and Dollar easily?
Yes. If you have a large amount of Chinese Yuan (CNY), it's very difficult to legally convert that to foreign currency or purchase substantial foreign assets. Foreign exchange is strictly regulated.
Until the Chinese government clamps down on BTC China, as I expect they will, bitcoins offer an excellent, possibly even legal, method for Chinese to take their money out of China. It's so useful in fact, that Chinese are willing to pay a 30%+ premium for bitcoin on the Chinese exchange.
Note that this same problem also stands in the way of those who might arbitrage the difference in the exchange prices.
Most of these purchasers are not really a net demand for Bitcoin, though, are they? I see them as mostly using Bitcoin as a short-term intermediary to gain USD or EUR while bypassing exchange controls. So they'll account for, say, 1,000 BTC bought, and 1,000 BTC sold.
Many of them may not have USD bank accounts overseas, or wish to have the funds associated with their name.
I suspect a large amount of the funds are ill-gotten gains from rampant corruption by government officials and cronies.
Also, many will probably decide to hold on to at least some bitcoin even if they do have means to convert to foreign currency. Since there is a massive amount of money trying to get out of China - hundreds of billions - it's certainly possible there is significant net demand. If each purchaser keeps 20% of their assets in bitcoin, and $10M is fleeing each day, that's $2M in net demand - enough to influence price significantly at current volumes.
The differential between the Chinese exchange and US exchange may partially be explained by Chinese purchasing in China - raising the price - then selling overseas.
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[ 2.6 ms ] story [ 74.1 ms ] threadWow, as I'm typing this now the market is massively recovering. I just saw it go from 600 to 700 in probably 30 seconds. There are a lot of people doing algo trading with bitcoin.
There are a lot of people trying to buy bit coin right now; it's a commodity and people are speculating on it. There is more demand than supply right now IMO.
Worth remembering that at least bitcoin is backed by some value of work, what is USD backed by again? Debt :-D
Obviously, I'm being a little bit facetious...
If you think General Motors is going to tank, you don't want their bonds, nobody does, they are junk. If Google were to issue a corporate bond series, everyone would eat them up like candy though.
Because the USA is the only remaining military superpower in the world, it's fiat currency is going to be #1 in the world. The Eurozone is #2 militarily, and it isn't a coincidence that the Euro currency is also #2. And places like Zimbabwe have jokes for militaries and jokes for currencies. A few years ago someone gave me a 100,000,000 Zimbabwe note as a gag gift.
2. USD is backed by the law -- laws concerning debts, laws concerning taxes, laws concerning torts, etc. The law is what makes USD useful, which is why USD has value.
Just to give you an idea, all the BTC in the world today were worth more or less as much as FIAT, which is probably the smallest car company out there.
An illiquid market is fantastically easy to move.. and rig.
But, every day the size of fluctuations that are possible will become smaller. More people holding BTC, more people buying and selling BTC, leads to less ability of a few buyers or sellers to cause a major change.
Someone in another recent BTC thread joked (in a "ha ha, only serious" kind of way) that the current speculative nature of the market might get enough people buying into BTC as a lottery ticket kind of purchase to cause the tipping point for it being a viable currency to happen without anyone noticing. If 20 million people in the US held Bitcoins...that's a big market for vendors to want to tap into. It's worth a little risk to get those buyers, as well.
How is that? It sounds like you will have lots of people with Bitcoin holdings. I do not see a currency, because I do not see where anyone is using Bitcoin as a medium of exchange.
http://www.cointagion.com/
Scan QR code with your wallet, hit Send, instadownload. You don't even have to touch the computer. At all. No account creation or anything else necessary.
Now imagine this with... let's say, pornography or poker. Instant gratification.
Amazon "one click" ordering could become Amazon "no click" ordering :)
Which is all it takes to have lots of people who want to buy things with Bitcoins. Since there's almost zero barrier to doing so, once you have enough vendors accepting Bitcoin, there's little reason not to buy things with Bitcoin.
What I'm getting at is: The influx of millions of new Bitcoin holders will lead to an influx of new vendors accepting Bitcoin. Sure, people are still clinging to bitcoins like gold...wanting to hoard it rather than use it. But, that desire will fade when the market settles down and becomes more predictable.
"...once you have enough vendors accepting Bitcoin..."
There is also some irony in this statement:
"people are still clinging to bitcoins like gold"
Lots of people have gold but you would be hard-pressed to find any shop that accepts payments in gold.
But, it can't be anything other than a hypothesis until it is tested; neither you, or I, can know how this is gonna play out. Bitcoin isn't quite like anything else that has existed before, including gold or other currencies, so we're all guessing. I've laid out what I think will happen, and a bit about why I think it will happen.
One last point: Gold, precisely unlike Bitcoin, is not easily or cheaply transferable over the Internet. That's a big distinction and, I think, enough to make it clear we're dealing with a different thing entirely. I left it unstated before as I kinda felt it would be obvious to HN readers. But, any time anyone compares Bitcoin to gold or another traditional currency or store of value in a general way (without being specific about how Bitcoin seems to be behaving like that other subject in one way or another), I question the validity of the analogy straight away. I genuinely believe Bitcoin is something new, and new human behaviors will develop around it.
Until the Chinese government clamps down on BTC China, as I expect they will, bitcoins offer an excellent, possibly even legal, method for Chinese to take their money out of China. It's so useful in fact, that Chinese are willing to pay a 30%+ premium for bitcoin on the Chinese exchange.
Note that this same problem also stands in the way of those who might arbitrage the difference in the exchange prices.
(I've lived and transacted in China)
I suspect a large amount of the funds are ill-gotten gains from rampant corruption by government officials and cronies.
Also, many will probably decide to hold on to at least some bitcoin even if they do have means to convert to foreign currency. Since there is a massive amount of money trying to get out of China - hundreds of billions - it's certainly possible there is significant net demand. If each purchaser keeps 20% of their assets in bitcoin, and $10M is fleeing each day, that's $2M in net demand - enough to influence price significantly at current volumes.
The differential between the Chinese exchange and US exchange may partially be explained by Chinese purchasing in China - raising the price - then selling overseas.