

First Bitcoin "Depression" Hits - davidhperry
http://www.dailytech.com/article.aspx?newsid=21877

======
Groxx
> _millions of USD sunk into Bitcoins lost big in the flash crash._

Seriously? Check MtGox more closely. Even down at ~$10 where it is now, only
the extremely-new users who bought it at skyrocketing prices got screwed. And
by "extremely-new" I mean _extremely_. The prices are still above where they
were _less than a week ago_.

What we just saw was the bursting of the first large Bitcoin bubble, not the
first depression. Depression for the people who bought _during_ such a
freakish rise, yes, but there will always be winners and losers in any
economic game.

\---

edit: On a side note, I've found Paypal's "excuse" for not allowing
transactions with Bitcoin merchants a weak one at best. Why, then, have they
allowed exchanges with Linden merchants like VirWoX for the past _three and a
half years_?

\---

edit2: wow, this article gets worse and worse:

> _Mt. Gox is the world's largest bitcoin exchange, but it's suffered from
> major liquidity issues in recent weeks. The recent massive inflationary drop
> is also a sign of poor controls at the exchange._

Two questions: 1) why did Mt. Gox suffer? They're a trade tool, all the action
has _only_ been _good_ for them, to the tune of 0.65% of each trade! 2)
they're an exchange. If they wish to exchange at market price, what "controls"
would you expect them to put in place? People pay what they want to pay,
that's the way MtGox has always worked, they're just an intermediary.

~~~
netcan
It does undermine it as a useful currency though. Can't set prices in bitcoin,
can't safely hold money in bitcoin, can't safely sign future contracts in
bitcoin.

I'm not sure how much of that was going on in the first place, but isn't it
the goal?

~~~
Groxx
It's volatile, just like any similarly-tiny market. You can't set prices in
moon rocks, because a single round-trip to the moon would destabilize the
entire economy.

But you _could_ if trips to the moon were a daily occurrence, and the flow of
moon rocks were relatively steady. Or compare buying stock from startups vs
the Fortune 500. Bitcoin is too small to be reliable _now_ , but the bigger it
gets, the more resilient against such booms and busts it becomes. It's pretty
well established that it's not a stable market right now, but that's obvious
and it doesn't mean it won't become so.

------
jasonkolb
There is a lot of assumption going on in this article.

When you're talking about movements in currency crosses, as the article does
in focusing on the BTC/USD rate, there are a bunch of different reasons that
can move it. At the core though, there are two sides to a large drop in the
value of a Bitcoin vs. the USD. You can have a large number of people wanting
to dump BTC, _OR_ you can have a large number of people wanting to acquire
USD.

Note that the article itself talks about the turmoil in the US equity markets
on the same day. This usually creates a demand for USD as people require it to
meet margin calls or pay off debt which is denominated in USD. I'd bet on this
being the primary cause. In fact, if you look at the USD vs. any other
currency (EUR, JPY, etc) it rose in value against just about everything today.

The other reason, which I consider less likely, is that people decided to drop
BTC en masse for some other reason which is as yet unknown. This appears to be
much less likely, although it can't be completely counted out.

In short, the USD rose against just about everything today, and the BTC market
seems to have been affected more than most--primarily, I'm assuming, due to
the relative illiquidity of that specific market in general.

~~~
adrianwaj
I am inclined to think that the fundamentals of bitcoin are very good, it'll
be interesting to see how the price rebounds after this correction, I tend to
think with all the trolls happening in the forum that some big players want in
big time.

~~~
bonch
Can't believe you're calling other people trolls after your comment to a
previous Bitcoin post:

 _People that don't have the money to buy bitcoins and see them appreciate are
jealous of the ones that do. They hide their insufficiency and jealousy by
calling it a ponzi scheme or scam, so they can simultaneously feel superior to
the bitcoiners whilst tricking themselves into thinking they wouldn't buy them
anyway even if they had the money.

It'd also be a fear that one day they'd have to work on a bitcoin project,
which would be rubbing salt in the wounds.

Fact is, there are tons of hackers that could contribute a lot to the bitcoin
ecosystem, but they take the negative route instead: they don't want to give
anyone a free ride (or they like their rut.)

I could go on, but there are some anti-Israel type tones in the anti-bitcoin
brigade, that's my feeling when I write anything positive about bitcoin: I may
as well write something positive about Israel.

For many, bitcoin.org is the startup, and buying the currency is the
investment. People would upvote any story about their startup, and they'd
upvote anything about bitcoin. It's a fair thing to do.

Bitcoin is an extremely hacker-ish thing. It is a hack on the money supply. It
is as revolutionary to money (the concept, perhaps not the implementation as
yet) as mp3 was to music, or blogs to writers. It has hugely positive
implications, so people that hate it, will Really hate it._

------
Tichy
It doesn't feel like a depression when it was preceded by an incredible rally.
One month ago I sold my first BitCoins for 2.7€. Four days ago I sold some for
20€. When I got into mining, I thought even 1€ was incredibly high. Who cares
if they went down from 20€ a little - the exchange rate is still incredible.

I think 30$ was simply a very attractive exchange rate, so a lot of people
decided to sell. That's all there is to it.

Though I have to say it is fun to experience this with BitCoins. There
certainly was a feeling of "damn it, sell now or wait for even higher
prices???". But as far as I am concerned, it is still more like a game, so I
am not depressed if I lose out on the highest prices.

~~~
palish
I sold my 5 BTC at $30/coin, and walked with $149.96 after fees. It certainly
felt like a bubble, and I'm glad I got out when I did, even if it was only for
spare change in the scheme of things.

~~~
Tichy
Yes, it felt like a bubble. Then again, I don't really know. You never really
know with investing, I suppose. It felt like a bubble when I sold for 7€, and
now with hindsight 7€ was very low...

Maybe lots of people started buying drugs with BTC and hence demand went up,
or whatever.

I am also happy about the money I made. But I am not chiding myself for not
selling more BTC at the peak. Maybe if they dropped to zero value I'd be a bit
remorseful :-)

~~~
palish
Heh. How many BTC do you have?

~~~
Tichy
I have about 350 left - bought a miner in March...

I guess another reason why I don't feel depressed is that I always meant to
keep some of them as a long term investment. Just curious to see what happens
when supply of new BitCoins starts to slow down. Of course I am not the only
one thinking like that, so there are a lot of BitCoins out of circulation atm.

~~~
palish
Which miner did you buy? And how much did you pay for her?

~~~
Tichy
I bought an Acer gaming PC off ebay with an ATI HD5970 graphics card for 800€
- but the same offer was available for 700€, I just missed it.

It currently does ~580MHash/s and consumes about 300Watt - not too bad
compared to other miners, it seems to me. Also, if it survives the mining,
maybe I can one day use it as a gaming PC if mining becomes unprofitable.

I was lucky that a friend offered to host it in his cellar, though - would
have been too noisy for my flat.

~~~
palish
So you made... Like, $3,000?

Awesome.

~~~
Tichy
Haven't sold all the BTC, but enough to recoup expenses+some.

------
Mithrandir
_Take Silk Road, for example -- the topic of a recent Gawker piece. An IP
accesses this site, which is known for selling narcotics illegal in the U.S.
If this is a user's direct IP, anyone who can sniff the traffic of the site
can trace that user back to their home address, assuming cooperation of the
internet service provider.

However, if you first route your IP through Tor -- an anonymizing service, you
can make it extremely difficult for anyone to trace you. _

Silk Road is only available through Tor; it can't be accessed from the
clearnet unless you use something like tor2web.

~~~
gasull
Yes, but Bitcoin isn't necessarily anonymous:

<https://en.bitcoin.it/wiki/Anonymity>

If you want more anonymity in Bitcoin, run it through Tor and have the setting
noirc='1' in your ~/.bitcoin/bitcoin.conf. Also, Tor is more anonymous for you
if you act at least as a middle node, what also helps the network.

------
yaix
Off topic, but for the first image displayed next to the text:

>> "(Source: Google Images)"

What? Does Google Images offer own original content?

~~~
ltamake
Yeah, he might as well put "Google.com" as the source link for the article if
he's gonna cite his images like that.

------
ahi
I suspect #4 Getting Money In or Out is the only one that matters. There have
been problems getting USD into Mt.Gox for most of the week. Now with the
weekend upon us the trickle of new funds has become a drip. There are no
shortage of people in the forums looking to buy bitcoin with paypal, trying to
get in before all the bank wires on Monday. I expect it will be back up to
around 20 USD by Tuesday. Regardless of the cause, big swings like this don't
exactly help it's cause in becoming a widely used currency.

------
bdr
The exchange rate stopped going up shortly after The Silk Road closed to new
users. It started dropping soon after. TSR was the most compelling and
publicized use of bitcoins, and I expect that if the site re-opens there'll be
another round of publicity and bitcoins will rally.

So sure, probably some component of the initial rise was a bubble, but it's
important to remember that the actual utility of bitcoins also went down
significantly preceding the price drop.

~~~
shazow
I really doubt TSR was a significant factor in this.

Perhaps people are worried about Gavin giving his CIA talk in two days.
Perhaps Russians were funneling money again (like with egold when it was shut
down) and completed their trial run. Perhaps some investor got wind of this
cool thing called Bitcoin and told his assistant to buy in $150k (that alone
would move the price +$10), then sold a week later. Or perhaps it was the non-
stop increasing media coverage of Bitcoin in the past month. Or perhaps it was
the weekend when it's harder to get money into MtGox and the psychological
perfect storm of speculators manifested.

TSR was around since February, with steady growth up until the recent spike
when they closed to new users. Perhaps that was a factor, but I doubt it was a
significant one. I imagine most people who bought coins don't have Tor
installed.

------
philfreo
I made a quick and easy way to check the latest price:
<http://bitcoinprices.org/>

~~~
netcan
Care to add historical prices?

~~~
philfreo
probably not, just wanted something really fast & simple. try
bitcoincharts.com or mtgox.com

~~~
netcan
you have a better domain name, don't be lazy

;)

------
netcan
As far as I understand bitcoin (very very little) is mostly being bought/mined
by people who like the idea as an investment/experiment. That makes it a kind
of goofy commodity at the moment.

I think to get some stability and potential longevity bitcoin needs to be used
more like a currency. IE be used for buying and selling stuff. That's a
difficult piece of this puzzle. I can't think of any possible catalyst for it.

Can anyone explain to me how bitcoin might become something that a large
number of people use to buy & sell goods and services?

~~~
Tichy
It's much more convenient to use than existing methods of money transfer. Once
you already have some BTC, that is - getting BTC might be a bit too cumbersome
at the moment.

For example I bought some T-Shirts at SquareWear.biz. Upon checkout I get told
a bitcoin address I enter into my client to transfer the required amount of
BTC. A couple of seconds later squarewear knows I transferred the BTC and all
is done. No registration with a payment processor required.

Another example: in my blog I once offered 0.1 BTC to the first five
commentators on a blog post. Try that with other payment methods. Maybe money
wires would work, but then not internationally without high fees.

~~~
netcan
Do you think a bitcoin based payment processor where you can pay with bitcoin
or with credit card (processor converts to bitcoin behind the scenes) would
have any advantage? Would it be enough of an advantage to incentivise bitcoin
use (eg avoiding conversion costs)?

~~~
pemulis
You would have to offer a discount for paying with bitcoins for this to work.
I know a lot of merchants (in real life, not online) that offer small
discounts to people who use cash so that they don't have to pay credit card
transaction fees.

In any case, if you accept online payments via credit card, there wouldn't be
much point to converting them to bitcoins after the fact, unless you actually
prefer to hold BTC instead of USD. You've already paid the transaction fees.

~~~
netcan
The point (in my mind) is to make it entirely bitcoin from the merchant
perspective. They can set prices in bitcoin, buy stock in bitcoin, etc.

The other option is the less radical add a bitcoin payment option. This is
basically just using bitcoin as a payment method rather than a currency.

------
edoloughlin
_"a major improvement would be for Bitcoin exchanges to implement mandatory
market closures if the currency value dropped below a threshold"_

Would anyone actually exchange real world goods for bitcoins if the exchanges
close following a sudden drop? Am I missing something, or would this just
drive the value (temporarily) to zero?

------
Amincd
A depression doesn't mean a sudden drop in market prices. It means persistent
GDP contraction, which has nothing to do with the value of a currency.

The drop is also not the first bitcoin has had. It's been highly volatile
since the beginning.

This is just sensationalism.

------
perlgeek
I guess these fluctuations will go on until there are many more interfaces
between bitcoin and the rest of the world (ie places where you can earn and
spend bitcoins).

------
fleitz
The money is only 'lost' if A) they bought BTC at > $19 B) they did A AND sold
today, or C) the price never recovers to $28 USD.

I would assume given the types of people that BTC would appeal to that they
presume the US will persue a very expansionary monetary policy for the
foreseeable future. Maybe the gov't announced news that would suggest raising
interest rates or balancing the budget.

It could also be a sign that people are starting to do hedge fund type
operations with BTC. If you wanted to invest heavily in BTC using a few
hundred K to depress the price may be advantageous given the instability of
the currency.

------
shii
FUD. Pic related: [http://bitcoinweekly.com/articles/comic-reaction-after-
drama...](http://bitcoinweekly.com/articles/comic-reaction-after-dramatic-
rise-of-bitcoin-s-value)

