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Bitcoin dropping after BTC China said it is closing (cnbc.com)
123 points by koolba on Sept 14, 2017 | hide | past | web | favorite | 176 comments

Every time bitcoin slips a little, the anti-bitcoin crowd claims victory and it's kinda hilarious. The summer of 2015 BTC was around $200, it's now over $3,000- so up 15X in a bit over 2 years. This is failure? Why is down $500 failure but up 15X in less than 30 months not success?

There are about 11 million millionaires in America. There are only ever going to be 21 million bitcoins total. That means, even just among American millionaires, they will never be able to all own two bitcoins. How many will try to put %5-%10 of their net worth into bitcoin when they become convinced of its reliability?

Bitcoin has been under various forms of attack, by state level actors and by hackers for the past 8 years and it has done quite well. I am unaware of any software project that has captured this much value with this little vulnerability.

The value of all the gold in the world is about $8T. Bitcoin as a store of value has a lot of advantages over gold:

- Its terminal supply is absolutely fixed, unlike gold, and its rate of inflation is rapidly decreasing to below golds.

- It's easy to store wealth in without being obvious to others.

- It is easier to transport bitcoin than any significant amount of wealth

- It is easier to protect bitcoin than gold. Gold has to be guarded, Bitcoin can be split in to an n-of-m key and encrypted and replicated, securing it from fire, theft, etc.

So given all that, what is the ultimate intrinsic value of bitcoin? Lets say it is half that of gold. Then what's the intrinsic value of a single bitcoin?

That's something we can calculate: $4T / 21,000,000 = $190,476

Bitcoin is better than gold at gold's primary purpose. Yet its current value is much less than that of gold. This makes sense given that bitcoin has not yet crossed the chasm-- but gold is also something very rare for people to hold. People have a negative net worth and not a lot of them hold gold.

Bitcoin is the very definition of a disruptive technology that will revolutionize society for the better and hackers are embracing it. You should too.

> The summer of 2015 BTC was around $200, it's now over $3,000- so up 15X in a bit over 2 years. This is failure?

As a modern eTulip bubble, it's a "success" for anyone who has made money speculating.

As a replacement for fiat money, it's an absolute disaster as a currency. Volatility and high transaction fees have killed any opportunity Bitcoin may have had to gain traction as a way to pay for anything besides drugs, ransomware, and evading currency controls.

You can send several million dollars in under a day for about $0.50 right now. IS that "high fees"? Hell if you do it right you can do it in under an hour for under a dollar.

Any talk about it being a replacement for fiat money is evading my point. I made the point that it was a plausible good store of value, not currency.

Oh, and by the way, there's nothing wrong with using bitcoin to pay for drugs, and this argument is akin to saying that the US Dollar is evil because it is so widely used in the drug trade that every $20 bill tests positive for cocaine (so I've heard.)

As for evading currency controls, aka economic oppression- that's one of the great uses of Bitcoin that will help improve people's lives world wide.

Finally regarding tulips, you can't have it both ways- you can't say price going up is proof it's a mania and price going down is proof it's a mania. Tulips were not a revolutionary new technology.

If someone actually paid that small of a fee in BTC for several million USD, they would risk far more of their transaction being lost due to volatility during the multi-hour long transaction.

Anyone holding that much BTC, and facilitating that type of transaction will likely be subject to some form of regulatory scrutiny, sooner or later.

The size of the transaction grants it higher priority.

Remember though that "replacement for fiat money" isn't the only goal or measure of success for people who like bitcoin.

The usefulness as a currency or as anything else is irrelevant. Getting rich is the goal. It doesn't matter that the money comes from a bigger fool, or from someone who has to buy bitcoin to pay a ransom.

Financial sovereignty is the goal of the authors. Getting rich is the goal of the crowd.

>> - Its terminal supply is absolutely fixed, unlike gold, and its rate of inflation is rapidly decreasing to below golds.

This only applies to Bitcoin, and as anyone can see even big operations like Coinbase trade in at least three difference crypto currencies.

>> - It's easy to store wealth in without being obvious to others.

Can you elaborate on exactly what benefits you propose this offers? And don't say tax evasion.

>> - It is easier to transport bitcoin than any significant amount of wealth

We've been able to send money all over the world for decades now, I can literally send my friend in New Zealand $50 using an app on my phone. Not sure how Bitcoin makes this any easier. Maybe it makes it a bit cheaper, assuming it's value doesn't plummet while your transfer is going through?

>> - It is easier to protect bitcoin than gold. Gold has to be guarded, Bitcoin can be split in to an n-of-m key and encrypted and replicated, securing it from fire, theft, etc.

This is a hard sell. Your choices for storing Bitcoin are basically keeping it in some sort of online wallet through an exchange or an application running somewhere, or you can store it offline ie a paper wallet. I don't see how this is any easier to secure than putting a pile of gold in a vault.

Bitcoin is probably even less secure for the average person - all it takes to hijack a wallet is a simple key logger. Once your wallet is gone it's not like you can contact your bank to get it back or have transactions reversed like you would with a normal account. Not to mention all the millions of USD worth of Bitcoin that have literally just been lost forever by people forgetting a password, tossing out old PC's etc.

> We've been able to send money all over the world for decades now, I can literally send my friend in New Zealand $50 using an app on my phone. Not sure how Bitcoin makes this any easier. Maybe it makes it a bit cheaper, assuming it's value doesn't plummet while your transfer is going through?

It's not about sending $50, it's about sending $5,000,000.00. Which is an entirely different class of problem (paperwork, fees, process). Making that cheaper, faster, easier.

A massive assumption followed by a declaration that it's massively undervalued.

Yup, that's it, I'm investing!

>> Bitcoin is the very definition of a disruptive technology that will revolutionize society for the better and hackers are embracing it.

No, it's pretty much the definition of an e-tulip, and today has shown that it can and will be hugely affected by the actions of governments.

I guess since your response consists of just characterizations of me, ignoring my argument, and characterizing bitcoin as some form of "tulip mania" ignoring the history of both, and what bitcoin is, that no substantive response is necessary or would be useful.

You do not seem to realize that BTC was "crashed" from $1,200 to around $800 back in January of this year. Was that also proof of whatever it is you're trying to claim?

You think that when the price goes up it is proof that bitcoin is a bubble and a mania... and that when price goes down it proves it's a bubble and a mania.

Also, the massive down voting that my post has gotten- despite it being a substantive contribution to the discussion-- with the uprooting your post has gotten, despite it being nothing but characterizations-- is actually very bullish for bitcoin. So long as even the "hackers" here don't get it, then that's proof it hasn't crossed the chasm and isn't in a bubble. (And your opposition is really all about the fact that bitcoin disproves several sacred economic theories.)


I'm frequently appalled at how "hackers" and "technologists" here and in my professional life have little factual indea of how Blockchain works, let alone something like Solidity or EVM.

I am utterly convinced that this is the future "App Store" that we are building on and the fact that so many programmers are oblivious is a sign for me to Keep Loading up on BTC, ETH...

It literally is Programmable Value and Transfer. It's absolutely slick.

People have such cognitive dissonance since everyone has been pretty much lied to their whole lives on the nature of Money and Credit. This kind of social and technical phenomenon requires people to reject a previous understanding they had (which in turn is offensive because that understanding goes to the core of their being -- earning your first allowance as a kid, hard work for your first paycheck, etc).

It's defensive for past Ego Investment. It's abhorrent that one could have bought $100 worth of something just a few years ago and would be a millionaire today.

I wasn't making a claim, merely lampooning yours.

Bitcoin is essentially a database / blockchain service.

Why would anyone want to use Bitcoin versus any of the newer, faster, more feature advanced alternative crypto coins like Monereo, Litecoin, Ethereum?

Similar to humans, Bitcoin grows in value according to degree of faith placed in them. It's the same mechanism that gives Trump power and keeps minorities/women out of tech.

The two main forces that give Bitcoin more faith power than others are its age and how well known it is. The attack surface is small because of its simplicity.

I doubt the smart contract systems will be valuable until they build up a body of vetted (by time) law like Deleware has for startups.

>Every time bitcoin slips a little, the anti-bitcoin crowd claims victory and it's kinda hilarious. The summer of 2015 BTC was around $200, it's now over $3,000- so up 15X in a bit over 2 years. This is failure? Why is down $500 failure but up 15X in less than 30 months not success?

And if it steadily goes up, "Deflationary Currencies Can't Work".

And if it stays steady, "The market cap is too low to take on the world's transactions while remaining stable."

>> And if it steadily goes up, "Deflationary Currencies Can't Work".

Well it's true, the price of BTC rising steadily is not something which refutes that argument, particularly as BTC doesn't seemed to be used much as a currency.

I agree with the gist of the argument, but non industrial ( i.e. financial ) value of gold is much less than 8T, more like 1-2 T. So by this calculation max value is about 50k a bitcoin. So, upside of buying now at 3-5k is not as great

I think your numbers are reversed-- look at the PDF at the top of this page: https://www.gold.org/research/gold-demand-trends It appears that Industrial/technology use is around %5, and the rest is used as a store of value. However this is timely demand and it is clearly variable.

What I can't find is the percentage of all above ground gold that is held in vaults & Jewelry vs captured in industrial uses.

That would be a better figure-- because it takes into account the centuries of accumulated financial gold (whereas jewelry and industrial gold is more likely to be recycled over time.)

Also, I would consider jewelry gold to be financial gold as well, because it is really almost the only store of wealth available to people at the lower socioeconomic levels.

Jewelry gold is just jewelry gold - it has intrinsic value because it's a nice material to make jewelry from. That value is not financial. Bitcoin can't claim that part of it. According to wikipedia, The consumption of gold produced in the world is about 50% in jewelry, 40% in investments, and 10% in industry.

but you have to realize, part of that 40% in investments makes sense because there is a fundamental non financial use case - jewelry. Someone will always buy gold at some price to make jewelry. So, that also drives investments. So bitcoin can't claim all of that 40%

> The cryptocurrency traded at $3,601.40 at 7:58 a.m. in New York, far below an all-time high of $5,013.91 set earlier this month.

That's a 28% drop from the high. For normal securities a price drop like that in less than a month would be considered a crash.

Does it count for BTC as well or are the elevated levels at the start of the month with too thin a volume to be considered legit?

In cryptocurrency world 10% daily change is considered normal. The markets were extremely volatile in the past and as years pass by they become more stable. We are not there yet but I believe in the future as the market cap increases and more people get involved the price will stabilize more and such changes will be considered a crash.

Also do not forget the people that had money in BTCC exchange. I suppose many of them sold their BTC in order to withdraw there money hence the crash that you see. This price drop in BTCC exchange created arbitrage opportunities and so people (and probably auto-trade bots) started buying cheap BTC in BTCC exchange and then sold to another exchange - resulting in the drop of price that we see right now. Of course panic selling is happening right now too...

Don't forget that 20% changes are not something extreme. Check TSLA price between 23th of June and 6th of July this year. The price went from $383 to $313 which is around 20% change.

Tesla is considered an infamously overvalued stock, and even Elon Musk has publicly questioned the price in the past. It has had the highest number of shorts for any stock. Despite making 1/100th as many cars as the big manufacturers, it has a market cap higher than Ford and GM.

That is not exactly a great comparison. A normal blue chip won't fluctuate more than ten percent in a month, let alone in a day.

But currencies are supposed to be more stable than stocks. EUR to USD over the past month has wildly swung from 1.17 EUR->USD to 1.19 EUR->USD.

I agree with you, Tesla is a volatile and overvalued stock. My point was that such volatility is not unknown even to the US Stock Markets. I don't think a blue chip stock can be compared to bitcoin. It is interesting to see some big movement stock movements that happened in the past. http://www.investopedia.com/articles/stocks/12/most-shocking...

EURCHF begs to disagree ;-)

Of course the large move there was caused by politics but the same holds for this BTC drop.

I believe Tesla's value has everything to do with what people believe Tesla will be worth in the future, simply because confidence in Musk is so high. I think there's this unspoken expectation that Tesla enters the Pantheon of Large Auto Manufacturers.

From a value investing standpoint, it is overvalued, but obviously tech stocks play by different rules. However, even for a tech stock, TSLA is very high priced.

I wish them the best, and I truly hope they succeed, but it doesn't change the fact that the speculative value is super high compared to their asset value.

That explains why it can swing wildly in price while Ford generally won't.

the -coin in bitcoin and the -currency in cryptocurrency are misnomers and skeumorphs simply to make an abstract concept more relatable than "transferable cryptographic hash units"

For comparison, I checked how CNBC reported the TSLA price fall, to see if it treated it differently. If anything, they were more harsh on Tesla:

"Tesla Sinks 20% From High — Entering Bear Market Territory — As Concerns About 'Bubble Stock' Mount"


This was a drop over 12 days. It also dropped 20% in 4 days after hitting the $4500 all-time-high a month ago. It dropped 30% in 4 days after hitting the $3000 all-time-high three months ago. It dropped 30% in 2 days after hitting the $2700 all-time-high four months ago. Everything is fine.

I honestly can't tell whether you're being sarcastic or not.

It started the year under $1,200. He's not being sarcastic, this is a very volatile currency.

The reason is, it's not so much a currency as a store of value that is simultaneously benefiting from global bad monetary policy and the cycles of technology adoption.

I don't even think Bitcoin has crossed the chasm.

It's a new asset class.

No, his numbers are correct. The drops always settle higher than last "crash"'s peak. How long it will continue is anyones guess.. I think It goes on for quite awhile longer. BTC will eventually get expensive very to create but if the network is being used those creators should have lots of fees to help cover their work. If they don't then they're going to stop mining.

Cryptoassets move 30% in price any given week.

CNBC will call it a crash. The network continues to function as well as it did in 2011 when it traded for $1.

For an entire index, that would be a crash. If AMD dropped from 10 to 7 in a month, that would be bad news, but pretty normal.

The bad thing is that in cryptocurrency markets if BTC falls then almost everything falls. I suppose this will not be the case in a more mature market.

Because all the exchanges use BTC as a sort of reserve.

The price of bitcoin is an index of the bitcoin economy.

If a security dropped 28% on a 1-month basis, it wouldn't still be up 60% on a 2-month basis. Apples and oranges. IMO, this is an obvious correction from the most intense bull run bitcoin has seen.

Ironically, this is not the most intense bull run bitcoin has seen. It is a strong bull run for recent years, however, but Bitcoin is getting less volatile over time.

Agreed, if you are looking at growth as a percentage it's had some crazy fast doublings in the past. I was talking more in terms of overall volume of fiat-denominated trade, or in terms of dollar value increase over time.

The faster percentage growth periods did not see $600+ swing days.

And for Bitcoin and other cryptocurrencies this is just how life goes.

There are stocks, even well to do ones, which are very volatile. You can look up biggest gainers and losers on NASDAQ as an example: http://www.nasdaq.com/markets/most-active.aspx

Biggest gain and loss only for today has been 17 and 18 percent respectively. While one can argue on a stable stock vs BTC but that is not a fair comparison.

Comparing bitcoin to otc penny stocks is where we're at this point. I see bitcoin as more stable, but that doesn't really say much.

I am not making that comparison. Today's gainers and losers are priced more than $10. So not exactly penny stocks. Though both stocks mentioned are actually biotech stocks. Revolutionary but unproven tech. Wouldn't you say that is a fair comparison?

Misread your comment

Comparing BTC to a stock is partly the issue. I'd probably look more to other high volatility areas like commodities or options trading for comparison rather than stock markets.

It's a big dip right now, but not a crash.

Even stocks can rise 7% a day. Just some extra bad luck with stock exchanges in china and reaching 5k $

We will see how far it goes this time and when the big traders come back marching in ;)

It would seem that if China shuts down domestic Bitcoin exchanges that could have quite a big impact on the network as it could make the position of miners in china difficult.

Looking at articles like (https://www.buybitcoinworldwide.com/mining/china/) ~70% of all mining power is handled by China based groups, so it'd be a big change for that to be removed...

I think that big miners wouldn't have such a big problem if the exchanges get shut down - as long as they export bitcoins and import dollars or other currencies, buying those in foreign cryptoexchanges, the government should be happy.

What the government probably doesn't like is the other way around, when normal people buy BTC with yuan and then sell them abroad, exporting capitals.

"What the government probably doesn't like is the other way around, when normal people buy BTC with yuan and then sell them abroad, exporting capitals."

Don't they also get some type of currency back when they do this? which is probably then spent inside China too? I don't see how this would be different from the first scenario. Maybe I'm missing something.

It depends: if their goal is to export capitals, when they get foreign currency by selling the BTC they bought in China, they will keep that currency abroad and invest it there. Of course you can do the same with mining - instead of buying BTC at exchanges - but this will require first investing in China to buy China built mining equipment and operate your mine. That's the difference I see.

So does that mean AMD is about to lose their number one customers? China has almost a monopoly on mining due to access to low to no cost electricity. The miners preferred AMD Graphic cards and make AMD cards hundreds of dollars more valuable on EBay.


GPU's are still used in mining. But the majority of large-scale miners use ASIC chips to mine coins. ASIC chips are just more efficient and powerful. They are designed only for mining.

GPUs are used mostly for ethereum, ZEC, Monero etc now. I get the impression that the massive crypto-currency datacentres in China are mostly BTC and LTC ASIC operations.

It could be good for gamers if BTC crashes and ETH and the others crash alongside it, making mining unprofitable.

FYI in the last couple of months price pressure seems to have switched to the nVidia GTX 1070 cards as the Radeons have been overinflated or just unavailable, and the 1070 has a good price/performance ratio for mining too...

OCT BTC trading is legal in china.

The issue is with the exchanges not being fully regulated according to the desires of the PBOC. This was the problem earlier in the year. They are tightening the screws.

But you can sell BTC to people you know face to face and it's legal.

Mine in China, sell the BTC in Europe.

So it's lost half of its gains since early August.

Bitcoin almost defines volatility.

Market cap is the main reason in my opinion. The more people get involved the less volatile it is going to be. You should see how volatile BTC was in 2011-2012, what is happening right now is nothing in comparison.

The main reason for the volatility is that there is no actual use for them, and no entrenched demand via a tax system.

The price of bitcoin can literally fall to zero. With fiat currency, achieving that would require the government losing its power to enforce tax collection.

People losing interest in a fad seems to be a bigger risk than a governmental collapse.

I should give up on this, but I keep hearing this argument about tax collection. You can make an argument that fixed dollar amount taxes (almost like property taxes) drive direct demand for the currency. I need to pay $100, so I need to get that $100 -- if it costs me all my horses and gold to get it, then I have to buy it. You can even argue historically (in a manner analogous to the "Mises Regression Theorem") that some of the value of fiat currency derives from this historical usage.

But all modern taxes (really, even, over time, property taxes) are driven by the underlying value, not by a fixed amount, and thus create no actual demand for the currency. If the government requires that I pay 10% of my income, and my income is 10 cows, it does not matter what the price of cows in dollars is -- I owe the dollar equivalent of a cow. If dollars are expensive, then I trade one cow for a few dollars and pay that, if dollars are cheap, I trade one cow for a lot of dollars and pay that.

There is no net demand created by this, and I don't know why people keep claiming that.

The other side, the "actual use", is definitely a real thing -- price discovery is very difficult when there is no real commerce, and until a complete supply chain can be priced in the currency, it's going to be hard for there to be any stabilizing pressure.

The US federal government financed itself for the 19th century using land sales, tariffs, and little else.

Selling land, for USD, and USD only, is certainly one way that it made USD valuable.

Property taxes are very much the same kind of thing, as you mention. In effect, it makes landowners into tenants to the extent that the land is taxed.

The government, being defined as the entity with sovereignty over a given region and a monopoly on force in that region, it is in effect a landlord at root. And it can make people pay to live in the area it controls. It currently strays from this role by taxing other things as well, and in so doing is generally destructive to output.

But taxes on land and natural resources have no deadweight loss and historically have been the major source of government revenue.

So, in effect, fiat currency is land-backed. And land value comes from the value of the location, the desirability of living there, and the productive capacity of the region... which are in turn affected by government policy.

Like I said, you can make a historical argument. Though tariffs were usually based on the value of the goods, so my argument applies there, and land sales (as far as I'm aware) were done by auction, so do not represent net demand for dollars. Not to mention that for most of the 19th century we had some form of hybrid metal backing for the currency.

But in modern times, ~90% of government revenue [1] is from taxes that are relative to income, and thus create no net demand for USD. I don't know when this became the case (at least the 60s), but I suspect for a very long time. The federal government, as far as I'm aware, has no property taxes; those are at the local or municipal level. And there, they are based on the assessed value of the property, so if dollars are expensive, then the taxes are lower, and if dollars are cheap, then the taxes are higher. Because the liquidity is required, you could argue that there's some marginal effect, but given that equity is easily converted to debt at scale, I'm dubious that that would ever be a factor.

In my opinion, fiat money is the closest that we've been able to come to "good" money in a sense -- easily transactable, scarce, fungible, hard to counterfeit, easy to validate. The value derives from these characteristics. The "scarce" aspect is the one that bothers me the most, because it doesn't have the same guarantees about scarcity as something like gold (although it excels at the other points). The notion that money is "backed" by anything is and always has been a red herring in my mind; in almost every case, disconnects between the thing that explicitly "backed" a currency and the currency itself have had little to no medium-term effect on the value of the currency, because the currency typically "inherits" the scarcity aspects of its backing. To what extent cryptocurrencies can succeed is still up in the air, but I remain very optimistic.

[1] https://www.cbo.gov/about/products/budget-economic-data

The brute power relationships underpinning landownership ultimately distill down to military power, and landownership is determined that way.

No amount of institutional complexity can negate this fact. Land is necessary for all production and for all life. Control of land enables the owner to demand a rent, and to demand it in whatever form the landowner wishes.

That form could be as terrible or as optimal as conceivable, but that choice is ultimately up to the sovereign. None of your traits for optimal money matter by comparison. Those factors will surely enter into the consideration of any wise sovereign currency issuer, but only if they are wise.

The currency that is demanded could be a cryptocurrency, although a sovereign currency issuer would be foolish to ever choose that, and would put them at a strategic disadvantage during war.

The current total value of all US land and natural resources is in the tens of trillions, by most estimates.

> there is no actual use for them

There's a use for BTC, it's just illegal.

It definitely propped up by illegal activity, but to say it's only for that is silly:


That's one of rich private pre-schools in NYC. Last I checked, educating 6 year olds isn't illegal.

"It’s just really another payment option, Ciocca says. "If you don’t want to use it then by all means pay with a check—no harm, no foul."

I'm not convinced that bitcoin mixers provide anonymity guarantees. Cash is still better for illegal transfers. I've also heard overpaying for rare paintings and real estate are common ways that criminals transfer large sums of money.

Cash can be used for illegal purposes too. Private, unencumbered, tax-free transactions have licit purposes as well.

So what? Their point is that cash has other uses as well besides the illegal ones. I would argue that bitcoin has some additional uses besides the illegal ones, but they're extremely niche.

Part of the reason why the US Dollar is so valuable is because of its extensive use in illicit operations. Even if a cryptocurrency is used for illegal purposes, that use increases its value for licit activities, as niche as they may be.

How are you encumbered with normal currency? And how are you able to avoid taxes with bitcoin in a way that is legal?

> How are you encumbered with normal currency?

A simple example would be if I want to pay someone a large amount of money (>$10,000) privately. Using credit or a check creates a financial record. Cash is the only way to keep the transaction completely private. With such a large sum, it can become non-trivial to transport that much cash, especially internationally. There's also the obvious issue of securely transporting that much physical currency. With cryptocurrency, I can transport arbitrary units of value over the internet with the security of cryptography.

You may argue that there's no legitimate transaction that would occur at that high of a dollar amount, but I think that's a matter of opinion, and that individuals should be able to transact one to one without involving any third parties to transfer value.

> And how are you able to avoid taxes with bitcoin in a way that is legal?

This is a bit of a gray area. At the most illicit end, it's a total tax dodge by laundering/concealing income. At the legal end, I understand that there are cases where the taxes you're supposed to pay on bitcoin gains works out better than if you had made that gain through a stock or other type of investment. I haven't converted large amounts of cryptocurrency to USD or vice versa, so I'm not totally familiar with the IRS reporting for crypto assets.

That monitor I bought on Overstock with BTC was an illegal purchase?! Why didn't you warn me!

There are two jurisdictions that I know about which take tax payments in bitcoin-- in Switzerland and part of Japan (maybe all of Japan)

But this is irrelevant. Taxes have nothing to do with a currencies value. The tax rates in the US vs the EU do not affect the Dollar to Euro exchange rate.

This argument seems to be more a product of some sort of ideological fetish for taxation than an economic perspective.

I think people get confused by the units. A $4500 to $3500 drop feels worse than a $4.5 to $3.5 drop. Keep reminding people that bitcoins have fractions!

There are 3 major exchanges in china: BTC China, Huobi and OkCoin. Only BTCC allow ICO trading and it's the only one closing. Maybe it's related to the ICO ban from last week and nothing to do with bitcoin

Bloomberg is saying China plans to ban trading of bitcoin on all domestic exchanges.


If that's how Chinese exchanges interpret it also, this will have a huge impact on some of the largest miners and mining hardware companies (lie BitMain).

China not loving bitcoin and not being onboard isn't news. A communist government not agreeing with a decentralized currency shouldn't come as a surprise. Speculators who invest should understand that clearly, and not go into panic when China makes decisions that are very China-like. The good news is that it's a perfect time to buy more bitcoin and ether at a discounted price.

First of all, China is an authoritarian government, not a communist government. Second of all, China is doing this because they are suffering from [hidden] massive outflow, and need to clamp down on that. The Chinese economy is slowly collapsing from all the malinvestments, and the rich folks are trying to get their money out. Look at the richest man in China, Wang Jianlin, unable to leave China


"Wang Jianlin meets Hong Kong’s ex-chief executive Tung, quashing talk he’s barred from travelling"


It has less to do with China's theoretical alignment ("communism") as it does with the challenges to state financial controls, and in turn, China's economic model, that bitcoin poses. Bitcoin is a very useful tool for evading financial and capital controls, which is problematic for an economy with a) rich people trying to cash out and b) a growth model dependent on policies that artificially increase savings rates while minimizing the number of places regular folks can store their wealth.

Basically, China wants artificially high savings rates and for people to keep their cash in state-connected banks, which keeps the supply of money for investment high, because this is baked into their growth model. Bitcoin undermines that.

the high savings rate in China is a myth from 2004. In 2017, people poured all their savings into their kids/other relatives real estate purchases (which itself is a bubble). And the young people have credit card debts and no savings.

Real estate investments are a store of wealth, ie a savings product. Real estate investments are one of the few vehicles to store wealth other than relatively basic accounts that are available to a broad swath of consumers.

Yes, tell that to Greek citizens that were buying houses for 300k and now their value is less than 100k for the same house. Real estate is not a store of wealth, this has been proven many times in the past in several countries. I agree though that the prices on real estate are more stable than any cryptocurrency.

I didn't say they were good stores of wealth. I said people use them as stores of wealth. I making a descriptive claim, and you are making a normative one.

My bad, I understand what you mean

"This is good for bitcoin"

Price goes down? Cheap coins!

Price goes up? To the moon!

A government accepts bitcoins? It's the future!

A government doesn't accept bitcoins? They're scared, it means we're winning!

Price goes down? bitcoin is dead!

Price goes up? e-tulip, don't you see?

A government accepts bitcoins? Fools!

A government doesn't accept bitcoins? Of course! Why should they?

Just a counterpoint, the truth is probably in the middle.

>> The good news is that it's a perfect time to buy more bitcoin and ether at a discounted price.

Why is it discounted? Did their PE drop or what? I mean, why????

Because the price you can pay today is lower than the price someone else happened to pay a few days ago. It's purely psychological.

Most people who claim BTC is discounted now at $3500 probably also believe that BTC is a long-term good "investment", which would imply that they also think it's "discounted" at $5000.

I guess this is obvious to all, but there are no well-understood "fundamentals" yet for BTC.

The most charitable thing you can say is that buying at $3500 now is a better deal than buying at $3500 previously, given it's now been revealed that someone was willing to pay $5000 at one point.

Speculators speculate. Of course they have to use all bad news to make money on shorts, and good news to make money on longs.

If other governments in the world follow suit, what would happen to bitcoin? I think it could be rather easily marginalised.

The price would drop for sure. But the network would still survice.

The network would survive with a vastly reduced number of miners. But at that point it would become feasible for a state actor to wage a 50% attack against it and kill it for good? It didn't happen before because bitcoin was just a geeky curiosity; now that it's been proved to move real money, it has become a possibility.

Well in a bit of an ironic twist, because ASICs that are used for Bitcoin are kind of worthless without it, Bitcoin should continue to have enough value to run those miners at cost in some low electricity areas (assuming it doesn't entirely go under).

With a GPU mineable currency, if it crashes and becomes "unprofitable" to mine, people with GPUs can just use them for something else and the currency can die entirely.

So 50% attacks are still difficult because unless bitcoin becomes almost entirely worthless (at which point a 50% attack is kind of pointless), there is still just as much hashing power sitting around waiting to be turned on when it becomes profitable. Power that can't really be repurposed, so it's not really going anywhere.

It would be interesting to talk through that threat model, I think the over all network can be much more resilient to that sort of sustained attack than you're presuming.

Take note, high-risk investors: now is a good time to buy.

I remember the last time something China related happened in 2013 or something. I forgot the exact news but it sent BTC tumbling back to $200-300 in next couple of years before it came back up. If you believe in China's influence that much, then better wait it out. There should be much better price to be had.

> I remember the last time something China related happened in 2013 or something.

Are you conveniently forgetting the first few weeks of this year? They changed their policies towards cryptocurrencies in a way that wasn't quite clear (rumors were that "China is banning cryptocurrencies!" and "Chinese exchanges are closing!"). The reality of the regulatory change was tiny in comparison to the rumors, and many people profited from the short term rumor noise.

Yes, this is becoming a textbook example of the situation where the old investment adage applies:

"Don't try to catch a falling knife..."

There are other Chinese exchanges. If they announce something similar, Bitcoin will drop even further.

And it is pretty likely they do so. In my opinion China is issuing their own e-currency pretty soon, so they don't really want any competitors. We are living in very interesting times.

Why would China need an e-currency? If you're in China you can already buy things online using the good-old yuan. What value would another currency add?

Completely control on the people spending it. Government will be able to put taxes on the people and no one will be able to hide their earnings. Also I suppose it would be much cheaper than circulating paper money.

That would make things very interesting.

I got some ETH at $230-$240 range but it would not surprise me if we see a $170-$180 range (next resistance level) the next hours.

Resistance level? It's 2017 and you still believe technical analysis BS?

Humour me here: Wouldn't technical analysis be a good way to analyze something like ETH or BTC?

A normal stock has the underlying company, earnings, performance, forecasts, etc. to sort through and figure out where it is headed, but ETH and BTC have no such thing. So what better way to analyze than TA?

Except weather has an element of predictability, at least over the short range, the realm of finance is highly unpredictable even in the short term. Who foresaw this crash?

I sold all my ETH at 297 right after it was starting (I make sure to check the markets before I sleep because China is often more market moving than the US/EU). I've been worried about the truth of the recent statements made in China about closures. This is obviously totally anecdotal and I made a really, really lucky call. Can't say I thought it would continue to go down this heavily. I consider any money I've put in these markets mostly play money anyways.

probably the PBOC, who will use it to 'buy the dip'

Resistance levels do exist in reality, but things don't bounce off whole numbers because "magic". They bounce becomes humans are human and place their bids and offers at those whole numbers. That being said, I'd be looking at those bids and offers, not the chart.

These technical analysis features can become 'self fulfilling prophecies', if a significant number of market participants believe in them (meaning it's a psychological effect). Other than that TA seems to be mostly BS.

https://prnt.sc/gl3wa4 Resistance levels cannot predict price movements - they can just help you when you set some Limit Orders in an exchange, worked for me several times.

EDIT: The pair in the image is ETH/EUR

Not 100% and surely I don't believe I can predict price movements with TA. But resistance levels can help a bit. Don't forget that cryptocurrency markets are yet immature and self-fulfilling prophecies is something de facto in them

what is a better way to decide on buy/sell signals for cryptos in your opinion? Genuinely curious.

1. Buy coins.

2. Shut the fuck up about "signals" and "trading"

3. Build cool apps around the crypto ecosystem

4. See more and more people using cryptocurrencies

5. profit

What kind of apps can be built in the crypto ecosystem?

All kind of apps that can be built utilizing the power of fiat currency. Example 1: I can build a blog and start accepting donations in cryptocurrencies - same goes for online games etc.

Example 2: I can utilize the blockchain to proof authenticity of a document, image, sound, will, legal document etc.

Example 3: Filecoin, Siacoin, Storj - P2P file hosting

Example 4: Aragon - Decentralized trust-less companies - Test their alpha version - it seems the solution on the governance of open source apps

Example 5: Decentralized exchanges - check etherdelta.

The above are just really basic examples - we are still in a really premature phase. The whole point of cryptocurrencies is that I can trust and exchange labor, money or whatever with anyone worldwide without me even knowing them.

The worldwide economic crashes were the result of people trusting 3rd parties such as banks, investment firms etc. This problem can be solved.

I think it will be big for virtual gaming assets: https://spellsofgenesis.com/ and https://www.ageofrust.games/

"21" has a framework to assist it and a handful of developers have already built apps:


The illegal kinds that have high demand, like darknet markets.

If you're willing to gamble, buy and keep buying, and hope it doesn't crash. If you're not willing to gamble, go by an index fund instead.

Anyone who thinks they can figure out buy/sell signals for cryptos right now is a lunatic.

By figuring out how to manipulate the market or by deanonymizing the accounts of influencers (e.g., Chinese regulator or proxy) and following their trades. But that's a lot of work and may prove impossible.

Even better, use the dollar cost average approach to buy and don't sell unless you are using it as a currency. The world needs a digital currency now but the volatility is preventing that from happening.

Buy when everyone is selling like a maniac and cross your fingers. You should not invest what you cannot afford to lose. High risk - high gain...

There is definitely levels, but not for something where there is not even a range of concensus value.

define TA...Yes fibonacci spaghetti spirals are the financial equivalent of astrology, but the academic evidence supporting the performance of momentum strategies is well established.

Same here. I'm trying to figure out how to short ETH. Unfortunately, I'm a noob and don't know my way around.

You can short on Kraken. Fair warning: Kraken is absolutely not suitable for time sensitive trading. Their back end cannot handle low volume days, let alone high volume days. You can expect to enter the same order 5-10 times before it goes through without unspecified failures, and this is challenging because it may not accurately report whether an order succeeded at the API level, or was actually filled. But if your strategy can tolerate some uncertainly in when you'll be able to make an order, I guess it's ok.

You can short ETH on some trading websites such us eToro or Plus500 which in my opinion are not really great. A really high risk move would be to register on 1broker which is a CDF broker where deposits are done in BTC. There you can short BTC if you like. I would surely not leave any amount in that broker for a long time

Another way of shorting is to get an ETH loan from someone, covert it to $ and then wait for ETH to fall. When it does you can buy more ETH, pay back the loan and keep the profit.

If you use coinbase then you should try to login to GDAX with same credentials. It just works and the fees are like 0.25% per trade.

P.S.: GDAX is owned by Coinbase

I logged into GDAX, but it requires a webcam to complete the setup. Something that I don't have at the moment.

I blocked the webcam, then tried again and it gave me the option to upload photos of my ID instead. Not sure why that wasn't an option in the first place like it is on coinbase.

Even better, if you're the maker on a limit trade on GDAX, there's no fee.

Bitfinex is probably your best bet.

I'm using coinbase atm that doesn't short. Also has very high fees.

EDIT: bitfinex doesn't work on the machine I'm using. Guess shorting will have to wait for later.

When others' are scared be greedy. When other's are greedy be scared.

Don't try to catch a falling knife.

Its really hard to call a bottom. Even if you think the security will recovery, buying in at $2000 is cheaper than buying in at $3000.

I find it odd that China banned all cryptocurrencies but Bitcoin 2 weeks ago and that now a Chinese Bitcoin exchange is closing. China's position is still unclear at the moment and it seems to be what's making or breaking the BTC market.

They didn't ban 'all cryptocurrencies'. They banned ICO's instead, and (afaik) it's a temporary ban until proper regulations are in place.

You're right. However, I doubt they'll add proper regulations for hundreds of cryptocurrencies. What makes you think they will?

If they ban it completely and the demand remains, it'll disappear underground, while if the government embraces it and puts AML/KYC (and most likely cash-limits) in place, they can control (and tax) it.

Local bitcoins is already out there and if those get blocked by the great firewall of China, alternatives will pop up soon enough.

Also the ICO environment is littered with complete utter garbage and I can see lots of people getting burned when jumping in uninformed, which seems to be happening on an accelerated pace these days.

> I doubt they'll add proper regulations for hundreds of cryptocurrencies

Why do you think they have to do it in a "whack a mole" type of way?

It's not terribly difficult for one government to establish "best practices" and then ban all cryptocurrencies and/or ICOs that don't strictly adhere to it.

What I don't understand is that bitcoin is always referenced in value to USD, but there isn't enough fluid USD in the exchanges to match what the bitcoin network is theoretically worth. How do they decide what Bitcoin is worth, if the money that it's worth isn't actually around?

Also what happens when a big holder of BTC decides to cash out? Wouldn't it become similar to a typical bank run, collapsing the exchanges (and thus the market)?

There is no actual "worth" of all Bitcoins as a whole, whether in regard to USD nor in regard to anything else. The only thing that exists is the last price at which a non-zero amount of Bitcoins - usually only a tiny, tiny fraction of all coins, today usually not even a whole coin - has changed hands. This price, taken for every exchange, is then usually averaged to get a "market value" of one Bitcoin.

The "market cap" is then just a number calculated by taking this average and multiplying it with all Bitcoins in existence. Of course, the value would collapse instantly, if just a fraction of these is put up for sale for current market price. Actually you can witness this happening right now (try www.cryptowat.ch and just pick a Bitcoin exchange and watch how the price moves...mostly downward right now...because there's so much selling going on).

In case of Bitcoin it is even more severe, as it is rather well-known that only a fraction of the 16.5 million coins in existence is even accessible and an even smaller fraction of that is actually circulating. There are multiple millions of coins buried on wallets to which the private keys have been long forgotten. Or at least "most likely", because there's no way to prove whether a particular wallet is just inactive, but someone still has the key, or whether the knowledge about the key has been lost forever, and with it any access to the coins on it. I heard about estimates of only 8 million coins being actually accessible and in some kind of regular or irregular circulation...

> Wouldn't it become similar to a typical bank run

Yes and no.

User behavior drives the market price, certainly. But "bank runs" are only bad because of fractional reserve.

When the bank essentially loans out 80-95% of their assets in order to create more loans/credit (thereby creating $4-19 in new credit for every $1 in reserves), the run can empty reserves and there is pressure for the bank to call in loan repayments early.

BitCoin exchanges (in their core exchange role) don't create credit. They simply convert one currency into another. If an exchange also lends (so users can buy cryptocurrency "on margin"), it is acting in another role, one which is susceptible to "a run no the bank".

People buy everyday coins in iOS games and no one seems to care. but why do they care about bitcoin ? because it has real value, because people use it and furthermore , you have ATM machines with BTC. They will try to drop the price , not once but a million times, the same that they do with stocks. If you trade you care about it if you HODL and don't read news, you care 0.0%

Well... it was said earlier in the month that the ICO ban could be taken to be referring to any and all exchange between crypto-currency and 'real' currency, or between two crypto-currencies.

Perhaps the party in China has decided enough is enough, and that they must regain control over capital flows which can potentially leave the country - just like they have with foreign property investments.

Wow, check out all the related stories, etc. CNBC really don't like bitcoin do they?

I never understood this. How does one conclude that media doesn't like something? If you put yourself in media's shoes, their whole agenda is - news and advertisements.

It's no secret that BTC fans tend to take offense at even small insignificant stories criticizing BTC. They will flock to CNBC, register accounts to show who is the boss. So what do networks do? Fan the flame and write even more stories de-riding BTC. Because any publicity is good publicity. The BTC fan reaction at that point is a forgone conclusion.

>How does one conclude that media doesn't like something?

If an outlet shows a consistent pattern disparaging something.

>If you put yourself in media's shoes, their whole agenda is - news and advertisements.

Most big media outlets are part of larger corporate conglomerates. So it is in their interest to push a narrative that is helpful to the larger investment portfolio.

If you check the CNBC mobile app for the last 2 days the bitcoin story/s have been prioritized to the top position or second to the top. Given the frequency of news and the relevance to the cnbc audience it seems to me there is certainly some additional boosting for these to be constantly at the top.

As I write this reply. The bitcoin article is at the top. There are at least 15 more articles more recent than the bitcoin one from 3 hours ago.

Just interesting

Buy BTC on BitStamp >= 3150 today, stop loss 3087 Expires in 8 hours, after 8 hours move stop to breakeven Target >= 3600

This is but a battle in the oncoming monetary revolution.

I talked about this before, and most people instantly wrote this off.

The typical response was 'If X bans the cryptocurrency, we will just trade in another country. That's the whole point!'.

Can somebody explain what will happen if U.S starts to feel the pressure from Bitcoin and kills it at the point of exchange? Sure, you will still have your Bitcoins, but they will drop in value and become useless.

Furthermore, what will happen to the market if 1%'s attempt to convert a couple of billions to USD at the same time? Who will honor that transaction? The banks will not touch it.

This will end up just like the banking crisis sans a bailout. People can't get the 'money' out because the exchange rate is not going to be honored, and the value of their money will drop over night.

Yep, I’m fact I’m surprised the US government hasn’t acted yet, but I suppose they don’t yet view it as sognifixant enough to merit a response yet.

But the IRS has already declared Bitcoin a taxable as either income or as a capital asset. See https://turbotax.intuit.com/tax-tools/tax-tips/Taxes-101/Tax...

This legitimizes Bitcoin and allows the US government to benefit from its ongoing use, just as with other assets.

> Can somebody explain what will happen if U.S starts to feel the pressure from Bitcoin and kills it at the point of exchange?

Can you explain how they would? To me this sounds like saying the US would ban World of Warcraft cash.

the issue is at some point you need to be able to convert btc to dollars. and if that avenue is completely closed, value of btc will drop.

But that's not the long term plan. The way the community is pushing is out with fiat. If that's the case then the government is going to still want taxes....The way I see it they're either going to lose revenue due to the new market or facilitate cryptos to be converted for payments of taxes and all things electronic....If Bitcoin is THE success it claims to want to be.

that plan doesn't seem realistic or possible. US dollar is not going away. BTC will have to co-exist with it and be easily convertible into it.

Hold on, I thought crypto-currencies were using encryption to ensure that no one can create more currencies like a fiat currency.

But we can just clone the currency, let's create bitcoin cash! Or let's agree to change the algorithm!

Hold on, I thought crypto-currencies were meant to be immune from government interference.

Wait, China cracking down on bitcoin makes its value plunge!

There is only one way to learn discipline when investing, the hard way, loosing one's own money. Hopefully people haven't bet too much on this.

To play devil's advocate -

>> I thought crypto-currencies were using encryption to ensure that no one can create more currencies like a fiat currency.

Well, you can't just create more BTC, but if you fork it, sure, you can create a parallel currency called BCC where everyone who has BTC gets BCC too. The challenge is persuading people that BCC has value. Which apparently happened.

And you can conjure up whatever altcoin or ICO token you like. But again you have to make people think it has value. Such things are not interchangeable with BTC.

>> I thought crypto-currencies were meant to be immune from government interference.

Bitcoin is immune to government interference. The government haven't been able to mess around with the supply, or take anyone's bitcoin away or prevent people sending each other bitcoin. What they've done is tank the value by stopping exchange with other currencies. Arguably this isn;t much to do with bitcoin.

Of course if you're only interested in bitcoin because of 'investment' which you hope to turn into dollar or yuan gains, then that's something different...

>> Hopefully people haven't bet too much on this.

Well, there are quite a few dollar multimillionaires who have got there via cashing in BTC, so somebody has been paying in to the system!¬

> Well, you can't just create more BTC, but if you fork it, sure, you can create a parallel currency called BCC where everyone who has BTC gets BCC too. The challenge is persuading people that BCC has value. Which apparently happened.

Until the debate of changing the algorithm is opened again. Following the algorithm is only a convention. Conventions can change.

Who is losing money? A year ago BTC was under $600. Today it's over $3,000. Surely a painful lesson for anyone holding for 12 months.

Yes, you can fork open source software, but as you see the value doesn't come from the code intrinsically. BCH is at $500, even after pumping and a year long campaign of misinformation. Other alts have to provide compelling value to get a good market price.

Nobody ever said cryptocurrencies were immune from government interference. They are immune from government corruption. You haven't shown anything to the contrary.

IT's funny how, whenever BTC slips a little you guys declare victory, but you're kinda ignoring we're up 10X in 18 months.... where are your declarations of defeat? (if that's your standard- price movement.)

How many years of knocking down the same straw men is it going to take?

> BCH is at $500

Yup, a sure sign that something is screwy - let's fork the currency and award ourselves 10-20% extra money overnight!

they will be having this same argument when BTC is $40k and drops to $30k, will it be in 2 years or 5 years who knows?

> Hold on, I thought crypto-currencies were meant to be immune from government interference.

And they are... mostly, but remembers that a lot of people invest in cryptocurrencies without knowing what they're about. People's perception is what drives the market.

Even more fascinating is how btc speculators have managed to convince themselves that the original thesis crumbling actually improves their positions. The mind believes what it wants to.

Uh... please name the original thesis that is crumbling.

Coin supply limited to 21 million -- still in force. Easy global transactions online that you can do with your phone-- still working Censorship resistance-- still there Trustlessness -- still trustworthy

What exactly do you think is the thesis that has crumbled?

I mean, the value of bitcoin has gone from ~$7 in 2011 to almost $5,000 today. So a momentary dip due to bad news isn't that big a deal in the grand scheme of things.

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