These fluctuations, however, show that Bitcoin cannot fulfill one of the central functions of currency: Exchange for goods.
How many of these multi-dozen-percent downward fluctuations will it take before those storeowners and shops that take bitcoin stop doing so or start maintaining an insane markup on Bitcoin prices?
I just bought a $1000 plane ticket a few days ago for bitcoin. Seems like that's fulfilling the role of a currency.
You should know that you don't actually have to hold bitcoin to accept it as a payment method. Services like Coinbase let you instantly exchange it to cash if you use their merchant tools, so the merchant is actually exposed to zero risk.
Ah, that explains it. It would be interesting to know what mechanisms Coinbase et al use to avoid balance sheet fallout by sudden downward fluctuations.
Quite poor financial reporting from AJ to be honest. BTC is highly volatile but it has generally stuck around $1,000 for the past couple of weeks, the upward spike to $1,200 was just one of many fluctuations which has once again levelled off at $1,000.
China telling large banks they can't handle BTC will not have any impact on the currency because everyone buying/selling BTC in China weren't using the banks anyway. The "dive" was potentially a slight overreaction to the news from China but it's also a fairly uninteresting fluctuation in a highly volatile resource.
how are average people in China buying bitcoins without the use of a bank??? How do they get the cash to the seller of the bitcoin I guess is my question?
Do they walk into a brick and mortar "bitcoin store" and make a deposit (with cash)... and then they can trade from that "bitcoin store"? (Provided they accept all the risk).
Is there some other user friendly way this happens that doesn't require the use of cards that flow through financial institutions?
Or is the trade really complex currently and relegated to just "people in the know" so to speak?
Just trying to get an idea of how these new rules would affect the average Chinese.
1. someone in China downloads bitcoin client or opens online wallet, and someone from another country sends them bitcoins for service or anther reason.
They move their money from their bank to an exchange and then buy bitcoins. The announcement says nothing about not allowing banks to deal with bitcoin exchanges, only that banks can't deal in bitcoin directly.
This "news" (which is really just the official announcement of something announced unofficially a couple weeks ago) changes nothing whatsoever about the status quo.
Those transfers to the exchanges from the banks are currently one of the few reliable monitors of this activity.
So I would first put the tech in place to monitor the bitcoin network... then I would say that you can't use banks to get to the exchanges anymore. (Monitoring blockchain changes on that scale is non trivial).
Anyway, if I was serious about impeding bitcoin usage... that would be the order I'd do things in.
> Prices on BTC China, the country's biggest Bitcoin trading platform -- which had stood at more than 7,000 yuan (around $1,100) each -- plunged by more than a third to an intra-day low of 4,523.12 yuan.
A 33% reduction in value is a dive. It may be constrained to the yuan, to China, to the particular exchange or just the crazy fluctuations of bitcoin, but it is still a dive no matter how you slice it.
Working in amounts doesn't tell the whole story. Volatility is easier to understand when expressed in percentages. Have a look at the charts on bitcoinwisdom.com:
Explore various intervals (time period). Even at the 1d interval, there are 15% swings. Is this bad, given the qualifier that "it is Bitcoin" after all? That depends on what you expect Bitcoin to be. If you expect to use it as a currency, then yes, it's very bad. If you earned your Bitcoins yesterday, and you have to pay a bill today, then that kind of swing is a big problem. You could end up taking a 15% haircut. If you expect to use it as a speculative investment, then you've got a lot of opportunities for trading.
Both of these are fine, but they're opposing goals. Most economists agree that you want stability in a currency; that is the currency should act as an accounting measure only. It is a means of storing value at as close to NET zero gain/loss as possible, with it's real value being the ability to transact goods indirectly.
I'm not sure what values Bitcoin endeavors to hold, but if we're using duck typing, it looks a lot more like a speculative investment than a currency.
>Both of these are fine, but they're opposing goals. Most economists agree that you want stability in a currency; that is the currency should act as an accounting measure only. It is a means of storing value at as close to NET zero gain/loss as possible, with it's real value being the ability to transact goods indirectly.
I'm not sure what values Bitcoin endeavors to hold, but if we're using duck typing, it looks a lot more like a speculative investment than a currency.
I tend to agree that Bitcoin acts more like a store of value than a primary medium of exchange. Theoretically if a lot people started to use Bitcoin the volatility should decrease. Even still I think we may see the development of an alternative cryptocurrency that's supply is able to inflate dynamically to offset deflation...
the values of bitcoin, as I understand them, are ability to quickly transfer to any location without 3rd party, predictable total quantity, and exceedingly hard to counterfeit
If you implement a system that trades the bitcoin back into regular currency as soon as you get the butcoin its volatility should be negligible.
This could be a viable way of taking relatively anonymous payments and not loose more the say 5% to market fluctuations.
And you have 50 - 50 odds of loosing or gaining from market fluctuation so i don't see the problem.
Plus you can temporarily stop taking payments if your automated script notices the market fluctuate too fast and resume after the market has stabilized.
There was an even bigger dive a few weeks ago to 300, news channels just didn't have a story, and I'm sure if Snoop Dogg said bitcoin was useless back then, they would have used that... "Bitcoin dive after Snoop Dogg loses faith in the currency..."
What most reporting is missing is that the early adopters are cashing out because it is now worthwhile to do so. And the prices keep jumping right back up, due to the late adopters.
Whenever you see a huge crash in a short period of time and a quick gain, expect it to recover. If you see a prolonged slow decline, it's time to abandon ship...
This is true of any market. By the time it hits newsstands, the change has happened. That's why you read charts, not headlines, when trading (if you want to make money, that is).
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[ 4.8 ms ] story [ 86.2 ms ] threadYes, the virtual currency that soared from $100 to $1200 has plunged down to $1000.
Edit: 10% drop is considered a "correction". 20% drop is usually a bear market.
How many of these multi-dozen-percent downward fluctuations will it take before those storeowners and shops that take bitcoin stop doing so or start maintaining an insane markup on Bitcoin prices?
You should know that you don't actually have to hold bitcoin to accept it as a payment method. Services like Coinbase let you instantly exchange it to cash if you use their merchant tools, so the merchant is actually exposed to zero risk.
China telling large banks they can't handle BTC will not have any impact on the currency because everyone buying/selling BTC in China weren't using the banks anyway. The "dive" was potentially a slight overreaction to the news from China but it's also a fairly uninteresting fluctuation in a highly volatile resource.
how are average people in China buying bitcoins without the use of a bank??? How do they get the cash to the seller of the bitcoin I guess is my question?
Do they walk into a brick and mortar "bitcoin store" and make a deposit (with cash)... and then they can trade from that "bitcoin store"? (Provided they accept all the risk).
Is there some other user friendly way this happens that doesn't require the use of cards that flow through financial institutions?
Or is the trade really complex currently and relegated to just "people in the know" so to speak?
Just trying to get an idea of how these new rules would affect the average Chinese.
https://localbitcoins.com/
I imagine they use that or something similar.
2. mining.
This "news" (which is really just the official announcement of something announced unofficially a couple weeks ago) changes nothing whatsoever about the status quo.
can't they just tell the banks that they can't deal with bitcoin businesses in the future???
but I wouldn't.
Those transfers to the exchanges from the banks are currently one of the few reliable monitors of this activity.
So I would first put the tech in place to monitor the bitcoin network... then I would say that you can't use banks to get to the exchanges anymore. (Monitoring blockchain changes on that scale is non trivial).
Anyway, if I was serious about impeding bitcoin usage... that would be the order I'd do things in.
Honestly i expected more but it's already recovering it was more like a minor bump in the road.
> Prices on BTC China, the country's biggest Bitcoin trading platform -- which had stood at more than 7,000 yuan (around $1,100) each -- plunged by more than a third to an intra-day low of 4,523.12 yuan.
A 33% reduction in value is a dive. It may be constrained to the yuan, to China, to the particular exchange or just the crazy fluctuations of bitcoin, but it is still a dive no matter how you slice it.
Everywhere else the dive was much smaller, and it's already recovering.
http://bitcoinwisdom.com/markets/bitstamp/btcusd
Explore various intervals (time period). Even at the 1d interval, there are 15% swings. Is this bad, given the qualifier that "it is Bitcoin" after all? That depends on what you expect Bitcoin to be. If you expect to use it as a currency, then yes, it's very bad. If you earned your Bitcoins yesterday, and you have to pay a bill today, then that kind of swing is a big problem. You could end up taking a 15% haircut. If you expect to use it as a speculative investment, then you've got a lot of opportunities for trading.
Both of these are fine, but they're opposing goals. Most economists agree that you want stability in a currency; that is the currency should act as an accounting measure only. It is a means of storing value at as close to NET zero gain/loss as possible, with it's real value being the ability to transact goods indirectly.
I'm not sure what values Bitcoin endeavors to hold, but if we're using duck typing, it looks a lot more like a speculative investment than a currency.
'Platypus typing', maybe?
I tend to agree that Bitcoin acts more like a store of value than a primary medium of exchange. Theoretically if a lot people started to use Bitcoin the volatility should decrease. Even still I think we may see the development of an alternative cryptocurrency that's supply is able to inflate dynamically to offset deflation...
This could be a viable way of taking relatively anonymous payments and not loose more the say 5% to market fluctuations.
And you have 50 - 50 odds of loosing or gaining from market fluctuation so i don't see the problem.
Plus you can temporarily stop taking payments if your automated script notices the market fluctuate too fast and resume after the market has stabilized.
I know, because my coinbase didn't come through till last Tuesday.
Whenever you see a huge crash in a short period of time and a quick gain, expect it to recover. If you see a prolonged slow decline, it's time to abandon ship...
Oh to buy a bunch at 2009 prices...
"Any statement about bitcoin's value is outdated by the time it's published."