

Ask HN: Will Bitcoin crash? - zindlerb

Do you think Bitcoin will experience a crash? If so what effect will this have? If not why?<p>http://goo.gl/CQjFe
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chris_dcosta
The only reason why a price "correction" may happen is if those who own
bitcoins - and large quantities at that - decide to dump them on the market at
a price that is well below the current exchange rate.

But you have to ask yourself under what circumstances could that happen.
Bitcoin cannot be "shorted" which is the main reason for that happening in the
real world.

What if many people were to need to sell their bitcoins for example if a bank
in a major country decided to call in all its loans. Again as we have seen
with the Cyprus Crisis you'd be better off _keeping_ your bitcoin rather than
selling it.

It's hard to see how a crash could occur without there being a major external
factor influencing the decision to sell large quantities of bitcoin.

Even if a government was to declare it illegal, there would be nothing they
could do to enforce it. Wallets are private and encrypted, and the blockchain
means that no government could grab your coin.

I think it's more than proved it's worth, I think the price can only go up
because normal currency is so open to abuse by governments - see Cyprus again.

Lastly,one other factor that could affect the price, is damage to the internet
in some form - restricting access or the ability to buy or sell.

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mattm
I don't believe so. There will be some downs for sure. The main difference
with Bitcoin is that every coin is accountable. You know if you possess it or
not. Compare that to Tulipmania for instance where one of the reasons for the
crash was that people would buy tulips from others that didn't exist.

It's the same as a run on the banks. It happens when the bank has lent out too
much money - money that it doesn't have. When people try to withdraw their
actual money they put in, it leads to the bank going belly up because they
actually created money out of thin air.

I think this is a big difference with Bitcoin and a reason why it will survive
the inevitable ups and downs and stick around for the long term.

~~~
zindlerb
This is a really interesting point! Do you think if there was a run on the
bitcoin exchanges they would be able to pay consumers back?

~~~
mattm
They should be able to unless malicious intent is involved or their servers
get overloaded but eventually everyone should be able to get their bitcoins
out as long as security is in place.

Even if everyone withdrew their Bitcoins from Mt. Gox into private wallets, it
shouldn't cause Mt. Gox to go bankrupt as they are not a bank but an exchange
and take a commission cut on each transaction.

The only way that this would be a problem is if someone sets up an exchange
but then gives people "fake" bitcoins to people that leave their bitcoins with
the exchange. They would have real bitcoins around of course if people
withdraw them but it would turn into a juggling act and eventually fail if too
many people withdraw their bitcoins.

I don't want to say it's farfetched but it's probably better to store your
bitcoins yourself in your own wallets rather than leaving a significant amount
in the control of someone else.

~~~
zindlerb
hmm I agree. But if there was a rush it seems like people wouldn't convert to
private wallets they would attempt to exchange their bitcoins for a national
currency. Mt.Gox seems to have a 10,000 max withdraw limit over a 30 day
period. Something like that would hopefully prevent Mt.Gox from not having
enough on hand national currency.

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unimpressive
It won't matter if it does unless you're speculating. (Or holding onto a non-
trivial number of bitcoin for whatever reason.) Bitcoin has proved it's point,
that a decentralized currency is possible, and that it can be done practically
and used for real transactions.

As a proof of concept, bitcoin is a huge win for anarchists and libertarians
everywhere. So in that sense, I don't think that it's original author really
cares.

I think that if it does "crash" the crash will be caused by regulatory
pressure, or it will live to see the end of bitcoins being issued in whole.

EDIT: In the short term, I would not be surprised if the currencies value
takes a sharp drop.

~~~
zindlerb
Speculation aside I think it has merit. If Bitcoin crashes it seems like it
could cease being used. Which would be unfortunate because Bitcoins have
proven to be an excellent medium of exchange. Also I definitely agree with you
about Bitcoin proving its theoretical value.

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zindlerb
The link is to the lifetime market cap of Bitcoin. Here is a clickable
version: <http://goo.gl/CQjFe>

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zindlerb
I don't have much bitcoin experience. The accelerating exchange rate seems to
indicate there will be a major crash. At the same time the increase could be a
result of bitcoin going "viral", but I don't think the amount of coverage of
bitcoin justifies the massive prices.

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Armslong
If a form of currency has intrinsic value as opposed to being fiat currency,
it will fail. Bitcoin has intrinsic value.

~~~
slinkyavenger
No it doesn't. It's value is completely tied to the market, with very few
exceptions, as evidenced by the USD charge for a good or service being
relatively static, while the bitcoin price fluctuates, according to the
market, to maintain parity.

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lsiebert
I think there will be normal currency fluctuations that people will call a
crash, at some point.

