
Bitcoin's Black Friday - steveplace
http://ftalphaville.ft.com/blog/2011/06/13/592661/bitcoins-black-friday/
======
jarin
A friend of mine bought about $2000 worth of Bitcoin a couple of weeks ago and
(despite my advice to transfer it to his wallet) left it in his Mt. Gox
account. A couple of days ago, the Bitcoin and his transaction history
completely disappeared from his account. No response from Mt. Gox yet.

~~~
gst
It would surprise me if Mt. Gox would maliciously manipulate accounts, as this
would not make sense for them. Currently they own loads of money via
transaction fees - why should they risk their monopoly status for some short
term gains?

~~~
hugh3
Perhaps because they think that there _are_ only short-term gains to be had
out of bitcoin? I'll take a hundred thousand real dollars now over a million
bitcoins in 2013, thankyou very much.

MtGox has been fundamental to the whole pump-and-dump side of bitcoin so it
wouldn't surprise me if they're manipulating the market.

~~~
gst
I guess that they currently already earn something like hundread thousand
dollars a month, based on the current volume and their trade charges.

~~~
estel
According to [http://www.smartmoney.com/invest/stocks/the-bitcoin-
triples-...](http://www.smartmoney.com/invest/stocks/the-bitcoin-triples-
again-1307638613180/?link=SM_hp_ls1e) they were making $40,000 a day. That's
pretty incredible.

------
tomelders
one has to wonder what would happen if people with a complex knowledge of how
these things work (market fluctuations and what not) decided to mess with
Bitcoin.

What I mean is, investors can be twitchy, and susceptible to manipulation.
It's sane to assume that people who invest in Bitcoin would be the same. Right
now Bitcoin is new, so I doubt there's any sort of "Round Trip Trading" style
activities going on, but should those types of speculators move in, could
Bitcoin survive it? Especially since there's no laws protecting it.

~~~
yaakov34
It's worse than that - a single exchange, Mt. Gox, has 98% of the bitcoin
trading volume. The exchange operator(s) have access to all information about
orders placed - and also have bitcoin holdings themselves. The potential for
manipulation here is unlimited. I do not mean to accuse them of anything -
there is no information. But this is not a healthy situation, given, as others
have said, absolutely no legal protection.

EDIT: I want to strengthen the statement that I'm not accusing the operator of
manipulation. He's well-respected by bitcoin forum participants, and he is
probably an upstanding guy. But in the world of finance, it is customary to
have more than just that to guarantee the soundness of a central exchange.

Add to this the fact that Mt. Gox is taking deposits totaling in the millions
of dollars without having any license to operate as a financial institution,
and that it apparently hold around 10% of all existing bitcoins (someone
traced a 470,000 bitcoin movement to a Mt. Gox account), and I have a strong
feeling that this will soon end in tears.

~~~
rb2k_
There are some new exchanges that will probably take a share of the market.
One of the more promising ones is tradehill.com. They offer a nicely polished
interface, offer dwolla payments/withdrawls and have a "viral" component by
giving a 10% rebate on fees for people singing up using a referral link. In
addition, they charge less than mtgox.

p.s. I was told that posting a direct link is frowned upon and I understand
that. But since not using a ref id will lead to a 10% penalty on fees, I feel
bad not leaving one: TH-R11089

Discussion about tradehill: <http://forum.bitcoin.org/index.php?topic=14010.0>
(You can find other referal ids on the bitcoin.org forums too)

~~~
yaakov34
And does /that/ one have a license to take deposits? And is it backed by
anything more than 4 stars next to someone's nic on the forum?

Bitcoins are a serious investment for some people now. They've put their
savings into this. This is not just funny money. It's a lot of fun to play
with, and I will keep doing that myself, but the people who are not just
playing anymore have an immense potential to get hurt by these exchange
swings.

By the way, I am nobody here on HN, but I do know that this is not the forum
to post your affiliate links. My friendly advice would be to get rid of that.

~~~
rb2k_
You are right in that Tradehill isn't necessarily 'better' or 'more secure'
than mtgox. I just wanted to say that there are more exchanges coming up and
that the situation will at least ease up in that direction.

As for the 'investment': Honestly, the people that invested their savings into
Bitcoins should be fully aware of the risk they're getting themselves into. As
with everything that might give return your investments manyfold, there is a
proportionally high risk.

I don't think it's a good idea to make large investments into Bitcoin unless
somebody doesn't need the money and thinks the personal joy he gets out of
gambling is worth it. I know I have a lot of fun with small amounts :)

As for the link, I'll remove the directly clickable one. But since signing up
without a referal will lead to 10% higher fees, I'd at least leave the code
for people that are interested. I was kind of uncertain but didn't find
anything when skimming the FAQ or guidelines. I hope that is ok. (If not,
somebody please respond and I'll kick that one too)

~~~
yaakov34
My point is that for something meant to be totally decentralized, bitcoin has
become nearly completely centralized instead - virtually every transaction
(even that buy-newegg one) has to pass through Mt. Gox, since suppliers have
to be paid in dollars, and Mt. Gox is the only place with sufficient volume. I
think that's an interesting and non-obvious outcome, and I wish that people
would try to do a serious economic analysis of bitcoin, instead of giving us
the standard opinions of "it's garbage" or "it's going to take over the world,
you'll be poor and I'll be rich".

Even if there are 2 exchanges, or 5, or 10, that doesn't change the basic
fact. After all, there are hundreds of central banks, but we don't refer to
regular currency as peer-to-peer. My further point, as an aside, is that the
shaky nature of the bitcoin exchanges makes this a dangerous investment for
anyone who is treating this as more than an experiment. Failure of even one
exchange out of several is still very damaging to an economy.

~~~
gst
Mt. Gox might be the most popular one, but unless you're going to buy/sell an
extremly high amount of Bitcoins, other exchanges are viable too.

Currently I like Bitmarket.eu most: This site acts as an escrow just for the
Bitcoin side of the trade - the "real" money is directly transfered between
buyer and seller (via bank transfer or Paypal). That's somewhat more
distributed than other sites that act as "full gateways" between buyers and
sellers.

~~~
yaakov34
Numbers are of the essence. That site has less than 1% of the volume of Mt.
Gox, and Mt. Gox is considered too thinly traded for business transactions.

I don't see how the existence of that site, and trading over IRC channels,
changes the fact that the bitcoin economy has become centered on Mt. Gox, and
in the future, maybe, on several other exchanges. I never said that Mt. Gox is
ALL there was.

BTW, I see the reasons that a proper exchange is more popular - there are 3 or
4 transactions an hour on bitmarket.eu, the escrow provisions are weak (as you
said, it's for the bitcoin side only), the Paypal fees will be high on the
small amounts traded, and trading higher amounts will get negative attention
from Paypal - they will not let people trade virtual currency over their
systems (and they consider bitcoin to be in that category).

------
gst
I'm currently not really worried about the volatility, as Bitcoin turned out
to be more stable than I expected for an essentially unregulated P2P currency.

Sure - it might be a somewhat bumpy ride at the beginning and some people
might be too afraid to buy any substantial amount of Bitcoins. But for the
future I hope that Bitcoin will be a viable alternative to today's payment
systems used on the Internet.

------
bradleyland
I'm really puzzled how anyone expects to gain a foothold in a currency market
with an instrument experiencing this type of volitiltiy. Popular currencies
move fractions of a percentage per day. A 5600% swing is like financial base
jumping.

~~~
bradleyland
Maybe I'm missing the point of bitcoin. I read through the Bitcoin FAQ and it
sounds an aweful lot like they're trying to create a system where I can
exchange my dollars for bitcoins and use them in transactions.

Am I wrong to be confused? Am I supposed to buy in to bitcoins with
confidence, given the wild swings the currency is experiencing?

I'm not trying to take some random dig at bitcoin. My statement about their
volatility is based in fact. I want to be educated on the matter. I find the
idea fascinating, but it seems that providing stability should be a goal near
the top of the list. Am I wrong about that?

~~~
jonnathanson
You're not wrong to be confused. How anyone could transact for goods and
services in such an extremely volatile currency is a mystery to me (assuming
it remains as volatile as it has been).

Especially on the supply side. Let's say I'm running a coffee shop that takes
orders in USD and in BTC. Let's say I want to sell a cup of coffee for $3 or 1
BTC. Or is it $3 or .0001 BTC? Or is it $3 or 1000 BTC? How do I, as a simple
seller of goods and services in exchange for BTC, know how to price my items
when they can be acquired via other currencies for relatively fixed prices,
and huge arbitrage opportunities constantly exist?

~~~
wmf
A suggested "solution" is to post prices in USD but perform the transaction in
BTC (based on the latest exchange rate) under the hood. This shifts the
problem to the buyer, who doesn't know how much will be taken out of their
wallet.

~~~
bergie
They had that system in Russia when the rouble was fluctuating more. All
prices were posted in "comparative units", which were basically USD. You'd
then pay using the day's exchange rate.

~~~
thebooktocome
And in Brazil.

------
scythe
Oddly, market conditions seem to have conspired to give bitcoin what is
essentially "backing" for the time being: that being goods and services which
are available only by bitcoin and not by other routes. Among these include
ways to buy products not ordinarily available in a country (such as the recent
newegg-via-bitcoin site that showed up) and illegal products (such as Left 4
Dead 2 in Australia, or the more obvious example of psychoactive drugs). So I
doubt you'll see it crash all the way, though it will probably remain unstable
for the forseeable future.

~~~
hugh3
Well, it's not too tricky to buy foreign computer games in Australia; the
authorities don't care _that_ much. And the drug thing? Well, it remains to be
seen how long it'll be before the authorities shut that one down.

~~~
Estragon
It's not really possible to shut it down. They may be able to chill it
substantially with sting operations on buyers, but that's not going to stop
it.

~~~
cookiecaper
Many people hear that btc is an "anonymous currency" and think they're free to
participate in all kinds of illicit activity on btc. The reality is that every
btc transaction made is publicly recorded and the so-called "anonymity"
depends on the obscurity of the btc addresses used in the transaction. Also
note that these implications are not necessarily isolated to one transaction;
if you and your partner both make a trade using new btc addresses, the coins
that were traded can be traced all the way back to their generation and
perhaps someone two transactions up the chain will provide a lead as to who is
doing what ("oh yeah, that was a trade I made with Johnny...").

Additionally, if the government ever seizes the wallet of a dealer, which is
likely to occur in the event that a search warrant is executed, they will have
a list of addresses with whom the dealer has traded. These addresses can then
be found and traced in the publicly-available tx chain. In this way even
innocent people may be implicated in investigations surrounding illicit
trades, and trading with a person that doesn't understand the implications of
reusing or publishing a btc address can significantly weaken not only your
transactions but other transactions that occur in the network.

The anonymity issues surrounding bitcoin are certainly more thorny than they
appear on the surface. If you intend on using btc for illegal purposes, you
need to understand what you're doing and be very careful, just as I'd imagine
you need to do when trading illegally in other media.

~~~
dave1010uk
Theoretically, someone could make a BTC to BTC anonymizing service. You could
even put your BTC through multiple anonymizing services, similar to how you
can route network traffic through multiple proxies.

~~~
ssharp
Money laundering?

~~~
wmf
Nah, the Bitcoins are still dirty when they come out.

~~~
saulrh
So you never take them out yourself. Use bitcoins to sell something to a
friend or someone on the internet, use bitcoins to buy something.

------
rms
The author of this article doesn't seem to realize that Bitcoin has dropped
30% in one day many times before.

------
programminggeek
Bitcoin's daily trading volume is incredibly small. That means if some even
remotely large investor decided to buy or sell in volume, it would move the
needle in big ways. I doubt there will be any kind of stability in Bitcoin
volume until it is being traded in the billions or trillions of dollars, not
in the millions of USD.

~~~
steveplace
Replace Bitcoin with silver and you've got the past 3 months in a nutshell.

~~~
hugh3
I don't get it. Surely the market for silver is enormous?

------
Swisher
So aside from the "crash"...How many of you sold at $30 and repurchased at $10
only to sell back at $25? I unfortunately had nothing to reinvest otherwise I
would have been all in on that ride.

------
lowglow
I wish I could get physical bitcoins. That would be great :) It would be a
true "trophy" of the new dotcom era.

~~~
wmf
<http://bitbills.com/>

(Another symptom of the bubble: there's a three-month backlog. (Was there a
backlog on Aeron chairs in 1999?) Considering the primitive tools and
exorbitant markup, I can only assume that people are ordering these for
novelty purposes.)

------
derrida
Don't upvote this article. It hasn't addressed LulzSec's claim that they were
selling off. It is back up to around $25 again.

~~~
derrida
I just got down voted for pointing out the article is factually wrong and
suggesting that it not be up voted for that reason. Believe what you want to
believe internets!

~~~
brown9-2
What is factually wrong about the article? It seems to me that what it is
reporting is the dramatic drop on Friday.

Whether or not the price later regained what it lost on Friday does not really
impact the main point of the article - the existence of such a drop, no matter
how temporary it was.

