I think the biggest fault with bitcoin is the name, coin.
People like coins and cash to be liquid, stable, and ultimately not a ponzi scheme (by this I mean growing by an ever slowing amount, that gives added value to those who mined early and held, punishing any sizeable withdrawal, dividends paid only due to more outside money coming to the fund..).
Too many people have taken to investing in it with the attitude that it always rises, yet in a classic characteristic of a bubble backed entity it doesn't take much to crash the value of the asset.
Another thing that tends to confuse people about bitcoin as well is that there are 100,000,000 satoshis per bitcoin. This hasn't really been communicated by the press. Every person who doesn't follow bitcoin closely or understand the underlying technology is always surprised by this.
And it doesn't matter what "people are used to", they will still see value in it eventually, just like they did for thousands of years before the central banks took over and started messing everything up, including our education. No wonder nobody understands that just a few centuries ago, private money was already a thing.
Read the Bitcoin FAQ to learn a bit of what it is and how it works and why it can't be stopped. From your username I deduce that you haven't done so yet.
Also, it's not what "I think happened", just history. That snarky tone was unnecessary from your part, especially when you don't understand the topic.
Heh, I understand a bit more about BTC than you think...
And you didn't answer my question, perhaps because you do not understand what happened that resulted in the previous shift from a currency base of fundamentally finite supply to fiat currency. I suggest you read up on it.
A ponzi scheme has a specific definition. By your modified definition certain commodities, such a gold and oil, are ponzi schemes because they become scarcer as time goes on.
>it doesn't take much to crash the value of the asset.
Looking over the past few days, the price is 8% or so below what it was. Not much of a crash. Predictably, as the market for Bitcoin has grown it has become less volatile.
We can split hairs on definitions as long as you like. The trading desk I used to work at, we used to even have the phrase ponzi asset. It is quite common for firms in trouble to pay large dividends, to improve the stock rating, so they can raise more money. I worked on an equity derivs desk and have been corrupted by their terminology and no doubt thinking. I hope I made clear what I consider to be the issues, that lead me to want to use a negative word.
>as the market for Bitcoin has grown it has become less volatile.
I do not agree, the vomma does not show this characteristic trending in a reliable fashion.
That is not a Ponzi scheme, that is called increasing scarcity.
Bitcoins are not much different than gold. People hoard them like an asset, but because there is nobody at the controls for liquidity (and the impending scarcity) it's not taken seriously as a currency.
> and ultimately not a ponzi scheme (by this I mean growing by an ever slowing amount, that gives added value to those who mined early and held, punishing any sizeable withdrawal, dividends paid only due to more outside money coming to the fund..
Yea well that's not what a ponzi scheme is so you need to adjust your meaning and use the correct words. Here, let me help you out...
Ponzi Scheme: a form of FRAUD in which belief in the success of a NON-EXISTENT ENTERPRISE is fostered by the payment of quick returns to the first investors from money invested by later investors.
Nothing about Bitcoin is or resembles a Ponzi scheme; stop spreading FUD.
Mt. Gox didn't say they were resuming withdrawals, only that they had an announcement to make. There will definitely be a market reaction based on what they say (or if they instead keep silent, it'll likely be perceived as negative).
Also note that Mt. Gox tends to trade at a 10-15% premium to other exchanges, since most fiat currencies take weeks if not months to withdraw. Right now it's like 3%, and overnight, it actually dropped BELOW some exchanges. It'll be interesting to see what happens when things get back to "normal". Will Mt. Gox's premium return? Will it return in the form of the market discounting other exchanges?
It's scary that such a poorly run operation (what they have right now is essentially a software bug, due to not accounting for a types of BTC transactions; but they've crashed due to volume and have been hacked, to say nothing of the actions taken against them) can influence the price so strongly.
Question: How easy is it for, say, a minority of large holders to stave off drops in value? For instance, if I am holding ~250k BTC and notice an oncoming sell-off, how easy would it be for me to trade back enough in order to reinstate confidence on an exchange?
Is it a viable enough scenario to make it plausible? I'm not a BTC holder, so I'm curious as to how easy the market is to "prop up" in short term panics like this.
To prop the price up would require buying not selling BTC, so how much BTC you currently hold doesn't matter so much as how much USD you can pump in to keep the price up.
As for how well that would go, well the UK government tried something similar once:
I think you're talking about market depth? You would have to buy enough to exhaust the people who are willing to sell cheaply, before you could start buying at a higher price. http://bitcoincharts.com/markets/mtgoxUSD_depth.html This graph shows how many bitcoins you would have to buy/sell (on this exchange) to get to a given price.
It would move the buy price to $2000, but in theory the sell price wouldn't be moved and so there would simply be a large margin until liquidity improved.
If no one is willing to buy a bitcoin for $700 right now, there's no reason to think anyone would be willing to buy a bitcoin for $700 even if you were offering $2000 for any bitcoins on the market. Of course people aren't rational and you might catch out people ignorantly trying to follow a graph they don't understand.
This is in part why it is irresponsible for exchanges such as mtGox to report a single "price" for bitcoin, they should always report the current prices as a tuple of (Offer, Bid) prices.
How about, prices start reflecting true market sentiment without a huge manipulator artificially propping prices up on its own make-believe exchange that doesn't allow withdrawals and reports fantasy trades?
Could you please elaborate on your fantasy trades remark? I was aware of Mt. Gox fiat issues, and now the BTC hold. Were they accused of booking fictitious trades?
Gox had a huge gap in its price to other exchanges. This gap came to be because Gox replaced USD with Goxdollars (a kind of currency that only exists inside of Gox). Therefore arbitrage was not capable of closing this gap, because Goxdollars could not be converted to USD.
If you are trading Bitcoins for Goxdollars, that's fantasy trades.
However this novel introduction of Goxdollars was now consequently followed by the introduction of the Goxcoin which marks the migration complete. Goxcoins cannot be converted to Bitcoins. However you can now trade Goxcoins vs. Goxdollars.
All trades on Gox are now pure fantasy. Seeing as Gox is the Magic the gathering exchange, I find this strangely appropriate.
If you give me bitcoins, and I give you virtual magic mushrooms, and then I go and list the trade for the mushrooms online. Would say that, the assessment is true that this is USD trades?
I can buy food and cars and real-estate properties with USD. I can also buy BTC with USD which I can use to order stuff online or which I can use to convert back to USD... To buy food, cars and real-estate properties.
The point GP is making is that once things make it into Gox, they can't get out: your USD become "Goxdollars" and your BTC become "Goxcoins".
I don't know if Gox is going to resolve the issue but, in any case, it's certainly not the same argument.
As of now you can't buy anything else than Goxdollars/Goxcoins with Goxcoins/Goxdollars. Hence the "fantasy trades".
Gox's prices are off market because the market @ Mt. Gox is pricing in the fact that you can't cash out on that exchange. This happened to CampBX as well once they stopped ACH/WIRE withdraws. They were usually near bitstamp/btce/bitfinex/etc but once this occurred the price diverged from all the other venues where you can cash out.
But you are correct, in that Mt. Gox prices are now entirely 100% fantasy because nobody can cash out anything.
Every exchange has "GoxCoins" and "GoxDollars". It is necessary for any large scale bank or exchange to work. The creation of this fiction is not in of itself morally reprehensible... it is when the fiction no longer lines up with reality when issues arise.
"GoxDollars" stopped being "like real dollars" when USD Withdrawals were hampered or stopped.
"GoxCoins" just stopped being "like real Bitcoins" when BTC withdrawals stopped a few days ago.
Each exchange has its own circumstances that are reflected on the price. For example, it used to be difficult to get fiat into BTC-e, hence the price there was lower than the average (sell your BTC cheap now, or wait until someone wants to buy at the average price). To say that mtgox was manipulating the prices is an extraordinary claim and requires extraordinary proof, which you don't seem to have. A better explanation would be that they had problems with fiat withdrawals, probably due to ridiculous regulations and bureaucracy problems like the ones they suffered in the US, therefore the price was higher than the average (wait for your fiat, or get your expensive BTC today).
The article linked there, from Australia itNews[1], says:
The Central Bank of Russia considers Bitcoin as a form of "money substitute" or "money surrogate" which is restricted under Russian law. However, unlike use of restricted foreign currencies, Bitcoin has been outright banned.
I'll admit I don't read Russian, so I can't provide a more authoritative voice on the subject.
On the other hand, Singapore Government Decides Not to Interfere With Bitcoin[2]
Exchanges should not be affected by a loss of liquidity, if exchanges are well managed then a dip in liquidity would just be expressed as a wider margin between their bid and offer prices. The exchanges themselves should have no "skin in the game" and should not be affected by price fluctuations or by liquidity.
That's with a lot of should though, and there's little to no transparency in the bitcoin community to suggest whether any or all of those things are fulfilled in the exchanges currently being operated.
This guy went to Tokyo to "protest" at Mt. Gox' offices, staying in their lobby for days until he met key people at the company. No way to know if there is any causality, but soon after he talked to them, they halted BTC withdrawals. "I think [I] just witnessed MtGox die today." http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_a...
Is this not being overblown since it only really pertains to BTC on MT. Gox? Since yesterday the Coinbase price has gone from $800 to $670 to $750. Given the typical volatility of BTC and the apparent rebound in price on Coinbase, I'd hardly consider "Bitcoin sinks" as being accurate. Perhaps the title should read "Bitcoin on Mt. Gox sinks..." or "Bitcoin lists as Mt. Gox pauses withdrawals".
Bitcoin value didn't sink. The exchange rate on MtGox took a dip from $930 to $760 between yesterday and now but on other exchanges like Bitstamp it may have gone from $790 to $750.
The rate on MtGox was higher than on other exchanges because it was hard to get cash out of MtGox. Hence if you had money on it, the easy way to get it out was to buy bitcoins, transfer them to another wallet and sell them on a more liquid exchange like Bitstamp or btc-e where USD withdrawals are quick. This created too much buy pressure on MtGox and this pressure faded when they made it hard to even withdraw bitcoins. That explains the crash on MtGox but its amplitude was nowhere as large as on other exchanges who by the way handle larger transaction volumes now.
48 comments
[ 2.4 ms ] story [ 101 ms ] threadPeople like coins and cash to be liquid, stable, and ultimately not a ponzi scheme (by this I mean growing by an ever slowing amount, that gives added value to those who mined early and held, punishing any sizeable withdrawal, dividends paid only due to more outside money coming to the fund..).
Too many people have taken to investing in it with the attitude that it always rises, yet in a classic characteristic of a bubble backed entity it doesn't take much to crash the value of the asset.
And it doesn't matter what "people are used to", they will still see value in it eventually, just like they did for thousands of years before the central banks took over and started messing everything up, including our education. No wonder nobody understands that just a few centuries ago, private money was already a thing.
It's like saying "Not everyone has such glowing memories of gold", and you link an article that talks about inhumane working conditions in gold mines.
Also, it's not what "I think happened", just history. That snarky tone was unnecessary from your part, especially when you don't understand the topic.
And you didn't answer my question, perhaps because you do not understand what happened that resulted in the previous shift from a currency base of fundamentally finite supply to fiat currency. I suggest you read up on it.
A ponzi scheme has a specific definition. By your modified definition certain commodities, such a gold and oil, are ponzi schemes because they become scarcer as time goes on.
>it doesn't take much to crash the value of the asset.
Looking over the past few days, the price is 8% or so below what it was. Not much of a crash. Predictably, as the market for Bitcoin has grown it has become less volatile.
>as the market for Bitcoin has grown it has become less volatile.
I do not agree, the vomma does not show this characteristic trending in a reliable fashion.
Bitcoins are not much different than gold. People hoard them like an asset, but because there is nobody at the controls for liquidity (and the impending scarcity) it's not taken seriously as a currency.
Yea well that's not what a ponzi scheme is so you need to adjust your meaning and use the correct words. Here, let me help you out...
Ponzi Scheme: a form of FRAUD in which belief in the success of a NON-EXISTENT ENTERPRISE is fostered by the payment of quick returns to the first investors from money invested by later investors.
Nothing about Bitcoin is or resembles a Ponzi scheme; stop spreading FUD.
Also note that Mt. Gox tends to trade at a 10-15% premium to other exchanges, since most fiat currencies take weeks if not months to withdraw. Right now it's like 3%, and overnight, it actually dropped BELOW some exchanges. It'll be interesting to see what happens when things get back to "normal". Will Mt. Gox's premium return? Will it return in the form of the market discounting other exchanges?
It's scary that such a poorly run operation (what they have right now is essentially a software bug, due to not accounting for a types of BTC transactions; but they've crashed due to volume and have been hacked, to say nothing of the actions taken against them) can influence the price so strongly.
Is it a viable enough scenario to make it plausible? I'm not a BTC holder, so I'm curious as to how easy the market is to "prop up" in short term panics like this.
As for how well that would go, well the UK government tried something similar once:
http://en.wikipedia.org/wiki/Black_Wednesday
For instance, buying 16.6K BTC on Bitstamp would move the price to $2000. Selling the same amount would move the price to $360.
http://bitcoinity.org/markets/bitstamp/USD
If no one is willing to buy a bitcoin for $700 right now, there's no reason to think anyone would be willing to buy a bitcoin for $700 even if you were offering $2000 for any bitcoins on the market. Of course people aren't rational and you might catch out people ignorantly trying to follow a graph they don't understand.
This is in part why it is irresponsible for exchanges such as mtGox to report a single "price" for bitcoin, they should always report the current prices as a tuple of (Offer, Bid) prices.
No, it's not. They are reporting the price of an actual trade, where buyer met the seller. At that point the spread is effectively zero.
In reality all three should be reported together when one is as they are all very important.
Just because there's a buy bid at $700 for 1BTC and a sell bid at $703 for 200BTC, doesn't make these two prices equivalent or equally important.
If you are trading Bitcoins for Goxdollars, that's fantasy trades.
However this novel introduction of Goxdollars was now consequently followed by the introduction of the Goxcoin which marks the migration complete. Goxcoins cannot be converted to Bitcoins. However you can now trade Goxcoins vs. Goxdollars.
All trades on Gox are now pure fantasy. Seeing as Gox is the Magic the gathering exchange, I find this strangely appropriate.
Uh, no, it's real trades. That's the same argument as 'IF you're trading USD for BTC, it's fantasy trades!'
I can buy food and cars and real-estate properties with USD. I can also buy BTC with USD which I can use to order stuff online or which I can use to convert back to USD... To buy food, cars and real-estate properties.
The point GP is making is that once things make it into Gox, they can't get out: your USD become "Goxdollars" and your BTC become "Goxcoins".
I don't know if Gox is going to resolve the issue but, in any case, it's certainly not the same argument.
As of now you can't buy anything else than Goxdollars/Goxcoins with Goxcoins/Goxdollars. Hence the "fantasy trades".
But you are correct, in that Mt. Gox prices are now entirely 100% fantasy because nobody can cash out anything.
Every exchange has "GoxCoins" and "GoxDollars". It is necessary for any large scale bank or exchange to work. The creation of this fiction is not in of itself morally reprehensible... it is when the fiction no longer lines up with reality when issues arise.
"GoxDollars" stopped being "like real dollars" when USD Withdrawals were hampered or stopped.
"GoxCoins" just stopped being "like real Bitcoins" when BTC withdrawals stopped a few days ago.
It's sinking because Russia banned bitcoin yesterday.
https://news.ycombinator.com/item?id=7197173
Exchanges are losing liquidity because too many people selling on the news, hence amplifying the price drop.
The article linked there, from Australia itNews[1], says:
The Central Bank of Russia considers Bitcoin as a form of "money substitute" or "money surrogate" which is restricted under Russian law. However, unlike use of restricted foreign currencies, Bitcoin has been outright banned.
I'll admit I don't read Russian, so I can't provide a more authoritative voice on the subject.
On the other hand, Singapore Government Decides Not to Interfere With Bitcoin[2]
[1]: http://www.itnews.com.au/News/371774,russia-bans-bitcoin.asp...
[2]: https://news.ycombinator.com/item?id=6959545
http://translate.google.com/translate?hl=en&ie=ASCII&prev=_t...
[3]: https://news.ycombinator.com/item?id=7195146
That's with a lot of should though, and there's little to no transparency in the bitcoin community to suggest whether any or all of those things are fulfilled in the exchanges currently being operated.
https://news.ycombinator.com/item?id=7193327
The rate on MtGox was higher than on other exchanges because it was hard to get cash out of MtGox. Hence if you had money on it, the easy way to get it out was to buy bitcoins, transfer them to another wallet and sell them on a more liquid exchange like Bitstamp or btc-e where USD withdrawals are quick. This created too much buy pressure on MtGox and this pressure faded when they made it hard to even withdraw bitcoins. That explains the crash on MtGox but its amplitude was nowhere as large as on other exchanges who by the way handle larger transaction volumes now.