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Consider this a reminder that while Bitcoin may be an interesting technological achievement, as a tradable asset it is still basically a toy. Crappy exchange technology combined with low liquidity is a perfect recipe for this kind of volatility.



While I am in no position to predict the future of bitcoins, all new markets have these problems. At an early point in their history, stocks also had low liquidity and crappy technology. Both of these conditions will improve as an asset becomes more popular. It is a chicken-and-egg problem.


I think your sentence has too much of a tone of inevitability. "... will improve as an asset ..." should surely be "will improve if an asset ..." or perhaps "... in order for ...".

There's plenty of new markets which failed to take off, and died after a few years of use. Confederate dollars aren't quite the useful currency they once were, as an obvious example.

Otherwise it cuts too close to survivorship bias: is there a popular asset where the market has "low liquidity and crappy technology"?


> is there a popular asset where the market has "low liquidity and crappy technology"?

Yes, real estate.


Point taken. Speaking of liquidity, water rights are likely another, at least in the southwest where the relevant laws date back to Spanish colonization.


You are right. I should have added "will continue to improve, unless they implode.".


There's also the question of where the money will come from to improve the technology. One of the benefits of BTC is the low transaction cost. But it might be that those transaction costs are exactly what's needed to fund exchange development.


I think you've hit the nail on the head here - scaling up a real exchange is incredibly difficult and the kind of talent you need to hire probably has a price tag hugely in excess of the revenue of all BTC exchanges combined. These guys are probably struggling to even understand the problems they're experiencing, so it should come as no surprise that they're having technical difficulties.

I bet they're having even more legal difficulties though, as just running a regular share exchange requires a team of top notch lawyers to keep abreast of the huge volume of exchange laws. I doubt poor MtGox even has 1 full time qualified lawyer and they're dealing with entirely new legal ground.


Whatever happens, the market will set the price. Perhaps the current transaction costs are too low to enable high-quality scalable exchanges with the necessary tools (whatever they may be). However, if such exchanges are advantageous, the transaction cost will rise.


There are plenty of talented people who believe in BTC enough that they would work to get in on the ground floor of an exchange. Who do you think are designing custom ASICs for mining?


http://www.cringely.com/2013/09/30/doubts-bitcoin/

^ points out some nice parallels between the "Bitcoin rush" and the California gold rush. One of the points he makes is that it wasn't the miners, by and large, who ended up rich. It was the people who sold equipment and supplies to the miners. The namesake of Stanford University was one of them, interestingly.


As far as I know, the guys making custom ASICs for mining are selling them to miners for real dollars. I don't think that helps your point much.


Why do you think that?

The top sellers of mining hardware that I could find on Google (Butterfly Labs, Advanced Miners, Cointerra) all accept Bitcoin for payment.

Are you referring to some group upstream of the hardware sellers? I'm curious where you're getting this information from...


Do they "accept bitcoin" in the way that many big services do, where they get their payment out of bitcoin and into cash as soon as possible?


Maybe, what's your point?


I don't think its valid to call the buying and selling of Bitcoin a "new market." Bitcoin itself brings new idea, but the exchanges around trading them don't really solve any new problems in the way Bitcoin did. Its all old hat, and it just requires proper execution, not innovation.


You are talking about the future of bitcoin, he is talking about the present.

There may eventually be a time where trading in bitcoins is productive, but for now it is a bit risky.


This is more about a crappy exchange that has been crappy for most of its existence than about Bitcoin itself. The sky is not falling. MtGox may fall after this, but IMO that would be a good thing.


No, this is more about the freedom (and naivety) of the Bitcoin community. When you don't have any type of regulation or oversight in place, you get this type of free market free for all. There is no one single authority out there that can force Mt.Gox to clean ups it act. The only people with any power over the exchanges are their customers. But the customers aren't pushing for change for a variety of reasons. They either lack knowledge of these issues, knowledge about how these technical issues can cause problems, or have a vested enough interest in Bitcoin to overlook (or even down play) these issues.


I don't think his statement was with regards to Bitcoin itself. Calling it "a real tradeable asset" implies more about the market around buying, selling, and storing Bitcoin than the Bitcoin protocol. And its hard to argue that market is anything but immature.


I would imagine that similar things happened in the early days of online equities brokerages.


Not even just the early days - Microsoft's fairly recent attempt at providing software for the London Stock Exchange met with disaster and frequent downtime [1]. This from a major tech giant, not just a card game exchange. Running a real exchange is a very difficult thing to do once the scale starts to ramp up.

[1] http://www.telegraph.co.uk/finance/markets/4676369/Seven-hou...


This. I don't get why everyone is harping that one private company being completely incompetent has any reflection on the technology it acted as an exchange for.

MtGox never had their shit in order, exploded overnight because Bitcoin is awesome, and hopefully we are finally seeing their inevitable collapse so that someone with more competency can take over.


It wasn't Microsoft providing the software. It was software running on Windows. The actual software was an in-house developed matching engine called Tradelect. LSE eventually switched away to a 3rd party matching engine with their acquisition of MilleniumIT.


True, but Microsoft had a big role in it.

"The new technology platform has been developed using the Microsoft .NET Framework, with support from Microsoft and Accenture, and marks the final phase of the Exchange's four-year Technology Road Map project. "[1]

I was also told that there were Microsoft engineers on site doing training and review through the project. Either way, my point is that building a trading platform is extremely difficult even with top talent and enormous investment.

[1] http://www.onwindows.com/Articles/LSE-TradElect-system-goes-...


Good points. The only other Windows based matching engine I know of is Direct Edge in the US, and I think even they are going to switch over using BATS' Linux-based matching engine once the BATS-DE merger completes.


The interesting thing about bitcoin is that you can just trade your friends for some p2p, you don't need a central exchange. You don't need a bank account to send someone bitcoins or to get some. You can just hand someone $20 and your address and they can send it to you p2p. No banking infrastructure involved.

That boggles the mind. It is impossible for bitcoin to become fully illiquid as long as people believe it has value, because there is no infrastructure to approve transactions. The approval happens p2p.


Everything can be traded as long as people believe in its value. Currencies are proxies. Proxies function best with stability in value and wide awareness of relative values for goods and against other currencies.

Bitcoin and its ilk are going to repeat the issues the US had when small and regional banks all printed their own bills. Their info infrastructure were large books, updated monthly that provided info to determine exchange rates/values. People didn't like getting burned everywhere on transaction costs and their value going poof when unsavory characters ran the underlying banks into the ground or rumors about the stability of far off banks were spread.

Centralized. government-backed fiat currencies solve many issues that most Bitbugs are coming to grips with the hard way. It's those issues which are exposed publicly and quickly which will keep it the most amazing speculative financial invention to a group of fiercely, independently minded folks who have the skills and means to gloss over all the failings of such a device being a proxy for fiat currency. It's just another layer of abstraction, not a replacement. And it's a leaky abstraction.


All currencies involve a level of trust: a gold-backed currency unregulated by a central bank still requires you to trust the bank that printed the bills. Bitcoin requires you to trust the mechanisms by which it's traded and stored -- not the algorithms involved as much as the mediums through which you're exchanging them. As Glenn Fleishman noted, Bitcoin addresses the problem of counterfeiting, but it doesn't prevent fraud.

I suspect regulation of various kinds will come to Bitcoin not through authoritarian government fiat (see what I did there?) but the way most regulation actually comes to pass: the public calls for greater regulation and transparency. It's possible that Bitcoin markets will accomplish this with minimal government intrusion, and I'm sure that's what they'll all aim for, given the underlying philosophy. I'm just not sure it'll happen.


Funny enough, I can just give my friends cash and it works pretty well too.


That is exactly my point, of course. That it is still cash-like even without centralized exchanges, if for whatever reason such exchanges aren't very accessible (or don't exist.)


I'd sooner consider your comment a reminder that people will apply whatever possible interpretation to the facts is necessary in order to appear right. It's hard to even understand what it is you think you're contributing to the conversation. A dad-from-Growing-Pains-style chat on where to put our money? Reminding us that Mtgox -- which has a story on HN about them every other day -- is a clunky Rube Goldberg machine?

This comment really seems like poorly disguised crowing and nothing more. Not a reminder, certainly. Maybe a reminder of your great prognosticatory abilities -- you took the default position on 99% of new technologies, products and innovations. Where do you find the courage?


Sorry I hurt your feelings. Did you lose money or something?


No. It's really not obvious what it is you think you're adding to the conversation.




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