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Much like the New York Stock Exchange, Bitcoin exchanges have suffered from their first massive loss -- a virtual "Black Friday", so to speak.  (Source: Google Images)

Some say Bitcoins could make buying illegal drugs easier. However, in reality Bitcoins are far from "untraceable".  (Source: YouTube/Beardo/Dirt Nasty)

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.
Currency experiences massive inflation in a single day, markets stay open

The day was October 28, 1929 and the sky was falling.  That Monday the DOW Jones Industrial Average (DJIA) fell 12.82 percent.  History books show that the next day the DJIA bled another 11.73 percent.  Vast amounts of wealth were wiped out in an instant.

Today modern exchanges automatically close to prevent such catastrophic sell offs.  Or, they do in the real world, at least.  But on June 10, a new kind of market -- Bitcoins suffered a massive decline, that may signal the start of the world's first digital depression.

I.  A 30 Percent Decline in One Day

This Friday the New York Stock Exchange (NYSE) was hammered, losing 172.45 points (approximately a 1.4 percent dip) to close below 12,000 for the first time since March 18, 2011 -- nearly three months ago.  Traders greeted signs of slowdowns in global markets with serious concern.

But as bad a day as Friday was for NYSE traders, it was far worse for those who invested in an increasingly popular digital currency -- Bitcoins (BTC).  At the opening bell at Mt. Gox, the world's largest Bitcoin exchange, a single BTC cost $28.919 USD.  By mid-day that total had plunged to $20.01 USD -- a drop of 30.8 percent.

Granted, in recent weeks the market for Bitcoins has soared upwards, nearly tripling, due to increased demand and built in technical issues.  So perhaps this inflation was merely reactionary.  Nonetheless, it took many by surprise, as inflation on this scale had never before been seen in the fledgling Bitcoin market.

But, wait let's not get ahead of ourselves.  Why should anyone care if the Bitcoin market crashed?

Well, today on Mt. Gox alone, approximately $2M USD in Bitcoins were bought and sold in 5,871 trades.  That's unusual in and of itself -- only a total of $19M USD in trading volume occurred over the past six months.

The bottom line is that several things are clear from today's trading.  

1. The Bitcoin market endured its first digital equivalent of a "bank rush" with people rushing to exchange their BTC for U.S. Dollars.  
2.  People have a large amount of money -- millions of USD sunk into Bitcoins lost big in the flash crash.
3.  Unlike modern markets, which automatically close to prevent massive inflation, the digital Bitcoin markets stayed open.
4.  Something major is moving the Bitcoin market in a sharp inflationary direction, in contrast to the predict deflationary trend

So what are Bitcoins and why is this intriguing?  Let's take a look.

II. What is a Bitcoin?

Bitcoins [wiki] are virtual currency similar to the Linden Dollars (L$) used by Second Life users.

However, unlike L$, which are ultimately controlled by Linden Labs, a company (or "governing body" in some people's eyes), BTC have no central authority.  The currency instead relies on a peer-to-peer system where everyone logs transactions and monetary events, prevent false transactions.

Also, unlike the L$, the focus of BTC is to exchange the virtual currency for real world services, not virtual ones.

People can obtain Bitcoins in two ways  -- buying them or generating them.  

To generate them, you have to run a complex math hashing algorithm, which tries to find a new bitcoin "block".  Parallel computing devices -- namely GPUs have shown themselves most capable for this task.  In fact with modern AMD GPUs it is possible to "break even" on your hardware costs by generating Bitcoins.

For more info about Bitcoin generation, refer to DailyTech founder Kristopher Kubicki's webpage bitminer.info.

The other method of gaining Bitcoins is to purchase them at an exchange -- the largest of which is Mt. Gox.  For a full list of exchanges, refer here.

III. Are Bitcoins Anonymous?

One of the biggest monkeys on the back of Bitcoins is public misconceptions about privacy.

For example a Reuters report quotes a letter from Senators Charles Schumer (D,New York) and Joe Manchin (D, West Virginia) wrote to Attorney General Eric Holder and Drug Enforcement Administration head Michele Leonhart stating:

The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days.

Now this is somewhat misleading in that Bitcoins themselves can be more or less traceable than how the user communicates with uses their IPs.  Any time a transaction occurs, it's sent out from an initial IP to nodes on the Bitcoin network, which verify its authenticity.

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.  This is because BitCoin "accounts" are regularly generated and a single individual holds keys to multiple microaccounts rather than a single large account.  To an outsider, this account is just a random-looking string -- nobody can tell who owns it.  But using your personal key, you can sign transactions on the accounts you own.

As long as the public/private key cryptography scheme is sound, and you anonymize your IP, even the government will have a relatively tough time tracking you.  The same can be said about any activity that occurs online.

That said, there's numerous ways your privacy could be compromised if you're buying drugs or performing elicit activities. Some points of possible attack include:
1. Failure to anonymize IP due to using your direct ISP-provided IP address.
2. Failure to anonymize IP due to misconfiguration of Tor or other anonymizer (a surprisingly common occurrence).
3. Tracking of physical goods associated with purchases.

Wait, you say, how could #3 occur?  Well, let's say you order a kilo of powder cocaine, using your Bitcoin treasure trove.  Well the kilo comes from a well known dealer who's being monitored by law enforcement for their real world activities.  Law enforcement note the package arrives at your house.  They wait for you to take it in and then begin using it.  They obtain a warrant and raid your house.

Remember, almost no "drug dealer" is going to be exclusively doing business via Bitcoins.  So they're likely engaging in real world transactions that will make it likely for law enforcement to inspect anything they decide to mail.

In other words Bitcoin does provide users with a bit of anonymity, but to claim it's generally "untraceable" in principle is pure paranoia on certain government officials' and journalists' part.  Bitcoin-driven transactions are very traceable; it's just that so far nobody has been interested in investing the large amount of effort it would take to trace them, as they have with copyright infringement or child pornography.

The DEA's response indeed seems to hint at this.  Reuters quotes agency spokeswoman Dawn Dearden as stating, "The DEA is constantly evaluating and analyzing new technologies and schemes perpetrated by drug trafficking networks. While we won't confirm or deny the existence of specific investigations, DEA is well aware of these emerging threats and we will act accordingly."

IV. A Big Problem -- Getting Money In Or Out

While the threat of the U.S. government taking some sort of action over anonymity fears is certainly looming over the Bitcoin market, a far more serious problem is liquidity.  In the traditional global currency markets, you can instantly exchange your currency for other foreign currencies on a number of exchanges.  These exchanges can take bank wires or funds from digital accounts, such as Paypal.

By contrast Bitcoin exchanges like Mt. Gox do not accept debit/credit transactions.  Up until last week they did accept eBay, Inc. (EBAY) subsidiary PayPal.  However, PayPal has blocked transactions to the site.  This is because PayPal has a policy against virtual currencies.

With an easy PayPal route gone, market liquidity was dramatically reduced.  This may be a major cause for the market crash.

Currently the most well published ways to convert Bitcoins to USD or vice versa is to use Dwolla or Liberty Reserve.  These methods are relatively straightforward, but transactions through these online billing services often move at a glacial pace, hampering liquidity.  API problems with Dwolla further exacerbated the liquidity issues in recent weeks at Mt. Gox.

You can also mail a check to a certain individual known as "Bitcoin Morpheus" listed at the exchange, who will add funds to your Mt. Gox account.  Granted this route might not be for the faint of heart as it seems rather "unorthodox" to say the least.

Now there is another method that could work slightly faster than any of the above.  For now you can use a variety of means to quickly buy L$ (Second Life currency) and then use the virwoxSLL exchange to exchange L$ to BTC.  The purpose of L$ and BTC is quite different, so it's unclear how long this route will stay viable, and many people don't realize you can get Bitcoins in this fashion.

At the end of the day Bitcoin has a very real liquidity problem.

V. What's Next for Bitcoin?

Unless Gawker and other media outlets can drum up enough unfounded paranoia about peer-to-peer currency to evoke some kind of draconian action by the U.S. federal government, it's unlikely that Bitcoins will go away.

However, market volatility poses a very serious risk to BTC users -- be they miners, traders, or merchants who accept BTC as payment for goods or services.  To that end, a major improvement would be for Bitcoin exchanges to implement mandatory market closures if the currency value dropped below a threshold.  In theory this would be relatively easy to implement, and we expect that it will be done at some point to prevent one-day flash inflation/deflation.

At the same time, a viable billing service must step up and offer people the ability to use credit or debit card billable transactions in USD to buy bitcoins quickly and directly on a major exchange (e.g. Mt. Gox).  If this can be done, market liquidity can be restored and the currency will once more flourish.

Last, but not least, concerns about deflation must be addressed as demand grows and production slows.  As mentioned in the introduction, if deflation is not controlled, reactionary inflation spurts could be experienced.  Indeed, a reactionary market movement could have been part of the cause for today's record-setting inflation.

It is possible that additional bitcoins could be distributed or other mechanism employed to prevent deflation, much as they are with standard currencies.  

Bitcoins are certainly a novel idea in their implementation details and purpose.  This article offers an introduction, but barely skims the surface of this phenomena and the true facts about it.

Ask some and they'll say Bitcoins are a scam/pyramid scheme.  Ask others and they'll say the Bitcoin market has the promise to offer sustained success.  There's valid arguments on both sides, but at the end of the day Bitcoins will still be around for the forseeable future.

In trading late Friday, Bitcoins recouped nearly half their losses, bouncing back to 24.34.  That's still a massive crash -- around 15 percent in one day.  But it shows that the market isn't dead.  The U.S. economy survived Black Friday and today sustains a massive amount of wealth.  Likewise, perhaps the Bitcoin movement can survive this tough time and find its way.  After all -- people are still buying Bitcoins.


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The ultimate form of nonsensical speculation
By someguy123 on 6/10/2011 7:21:46 PM , Rating: 3
Bitcoins have no trade value (unless you consider coffee mugs and drugs good trade value), no practical value, and run completely on speculation. There isn't even any movement to make this into a legitimate form of "e-currency". Instead there's just this sudden rush to purchase amd cards and crunch numbers in hopes that some sucker will buy your coins for obscene amounts of money.

It's shocking and saddening to see how much effort is being put into crunching and trading coins for USD, while there's literally no effort being put forth to create a goods market in an attempt to legitimize it as some form of currency.




By jostmey on 6/10/2011 7:23:46 PM , Rating: 2
I disagree that the only thing you can buy with bitcoins are coffee mugs and drugs. Check out sites like bitcoinbulletin, searchbitcoin, and tiptopgem to see an aggregation of items from multiple sources. Then you will see just how many items are for sale in the bitcoin community.


RE: The ultimate form of nonsensical speculation
By icanhascpu on 6/10/2011 7:24:44 PM , Rating: 2
quote:
Bitcoins have no trade value (unless you consider coffee mugs and drugs good trade value), no practical value, and run completely on speculation.


So just like every other currency.

Money is a tool to trade value, it doesn't have value more than that itself.


RE: The ultimate form of nonsensical speculation
By TSS on 6/10/2011 9:32:43 PM , Rating: 4
It's no longer a tool used to trade value, in todays world it's a tool to trade faith. Money doesn't represent value and hasn't in a long time.

Bitcoins don't represent value either. But unlike real money they don't even represent nothing, it represents the energy spent making that bitcoin. It took alot of looking around before i found it clearly explained. Hashes generated by an algorithm will find "blocks", and these blocks are worth bitcoins. What do these blocks do? Absolutely nothing. Not a god damned thing but use energy.

So you need to use a tangible, valueble resource to generate power, that can then be used to generate an intangible resource that represents nothing. Where as the dollar represents debt so the resources needed to keep track of the system are a consequence and should be minimized as much as possible.

Just imagine this: If the federal US debt was converted to bitcoins generated on an AMD 6950, you would need you'd need roughtly 627 billion BTC (at an exhange rate of $23). An AMD 6950 uses up 0,2kwh per hour so 4.8kilowatt a day generating roughly 0,5 BTC a day. So to generate 627 billion you'd have to use 6 trillion kilowatts. (calculated using http://bitminer.info/)

So to show how much power that is, wikipedia lists the USA's nuclear power generation as 101,229 megawatts (i'm going to assume that's per hour). Basically you'd have to run all the USA's nuclear power plants for 103 days in order to convert money worth thin air to money worth even less then thin air. Money created out of material debt, instead of metaphysical debt.

Now i'm by no means a scientist, i'm not even good at math so i might be way off on the above. However, i do know one thing, I'm never ever going to take something that actually destroys value as payment. You can take your faith and shove it.


By invidious on 6/10/2011 11:42:18 PM , Rating: 3
quote:
wikipedia lists the USA's nuclear power generation as 101,229 megawatts (i'm going to assume that's per hour)
You are confusing energy and power in your calculations. Watts are a unit of power, which is the rate of energy conversion, in this case joules per second. Watt-Hours are the energy commodity that is converted to BTC.


RE: The ultimate form of nonsensical speculation
By BansheeX on 6/11/2011 6:04:54 AM , Rating: 5
The dollar has an issuer while everyone else has to work for it. The issuers (The Federal Reserve) and their friends in government/wallstreet all benefit unfairly from the creation of new money and by the time it gets to real workers, prices have gone up to reflect the diminished scarcity. It is a hidden tax and one of the dumbest scams this country's braindead populace has ever allowed. Even when we were on a gold standard, bankers saw that redemption of gold receipts never came close to depleting all gold stored, so they figured they could issue fraudulent receipts for which no gold existed and loan it out at interest. That's what caused bank runs before we federally blanket insured every bank regardless of what they were doing with the money.

Money has value if it defeats the inefficiency of barter and is a good store of savings. Not every product makes a good money. Gemstones have grades and good fakes. Chickens die and require upkeep and can't be divided. Grain takes a ton of space. Oil takes a ton of space and is combustible. Clearly, few people learned even basic economics in government high school.

Neither gold nor bitcoins has an issuer. It's not a "waste of resources" that it can't be created at someone's whim, that is precisely WHY they are better money than government fiat nonsense. We could have milligram denominated, plastic-encased gold. We could also have bitcoins. And the fiat issuers of the world who debt enslave everyone are FREAKING OUT.


By Manch on 6/15/2011 4:33:24 PM , Rating: 3
quote:
Chickens die and require upkeep and can't be divided.


I agree with die and upkeep but have you ever had a bucket of KFC?


By TSS on 6/21/2011 8:41:42 AM , Rating: 2
It's not a waste of resources because it cannot be created on a whim. It's a waste of resources since it takes tangible resources and creates a number on the PC.

500 bitcoins. There. How is what i just typed ANY different from 500 actual bitcoins, excluding the difference the numbers are displayed on this website instead of an "official bitcoin" website?

What i'm argueing is the same difference between theft, and copyright. You turn a PC off and you cannot acces bitcoins. Bitcoins dissapear with elecricity. Gold doesnt.

That's why their fundementally different. The money we have now is stored on PC's. Bitcoins are stored on PC's. they both DO NOT EXIST. it's not tangible. The only difference is one number is typed in while the other requires lots of electricity before it can be typed in.

Thats why bitcoins are worse then dollars.


RE: The ultimate form of nonsensical speculation
By docbill on 6/11/2011 11:11:55 AM , Rating: 2
Actually, your analysis is faulty, in that it assumes a constant value for bitcoins in USD. If you were to convert the entire US economy to bitcoins as you did so, bitcoins would become progressively more valuable. There are only about 21 million possible bitcoins that can be generated. So if you were to somehow magically replace all the currencies in the world into bitcoins over night, and you had generated all the possible bitcoins, then each bitcoin would have a value of $3,000,000.

Now the reality of the situation, is because bitcoins increase in value, at any given time only 2% or so will be in circulation. That means the market a bitcoin in a worldwide bitcoin economy would be about $150,000,000 each. So you see even if one assumes only a small percentage of the world economy would be transacted in bitcoins, the eventual value of bitcoins in this possible future is absurdly high.

Last year, people were trading 10,000 bitcoins for a couple of pizzas. Now they are trading the same amount for the cost of houses. If the successful eventually the same amount will be traded for companies like Microsoft.

Of course governments of the world would never allow such a complete redistribution of wealth. So even all other considerations aside, the experiment is doomed to failure. But the question is how high will it go before it completely collapses? After the collapse, will there actually be enough usage to maintain some sort of value as medium of exchange?


RE: The ultimate form of nonsensical speculation
By someguy123 on 6/11/2011 5:39:41 PM , Rating: 2
Why must there be some currency conspiracy attached to everything pro-bitcoin?

The problem with bitcoin is that its proponents are doing very little in terms of goods/service trading compared to merely crunching and reselling bitcoins for profit based off speculation. Someone posted some interesting links to find things that people are willing to trade, but even then these sites tend to only trade what you would normally consider scrap for coins.

If you really want the almighty conspiracy spearing government to get rustled, make this into a viable currency and not just a method of milking speculators.


RE: The ultimate form of nonsensical speculation
By docbill on 6/12/2011 12:22:31 AM , Rating: 2
Who mentioned a conspiracy?


RE: The ultimate form of nonsensical speculation
By someguy123 on 6/12/2011 6:19:56 PM , Rating: 2
quote:
Of course governments of the world would never allow such a complete redistribution of wealth. So even all other considerations aside, the experiment is doomed to failure.


RE: The ultimate form of nonsensical speculation
By docbill on 6/12/2011 11:03:39 PM , Rating: 3
That is not a conspiracy, that is just as statement of fact. People in power will not surrender power. However, there is no conspiracy, because there is no threat to their power at this time. I'm just saying if anybody did come-up with a successful alternate currency, if it caused a major distribution of wealth, it would never be successful.


By mudgiestylie on 6/13/2011 6:44:21 PM , Rating: 2
Don't you mean if it caused a "fair" distribution of wealth, it would never be allowed to succeed?
http://en.wikipedia.org/wiki/Liberty_Dollar


By docbill on 6/13/2011 9:16:10 PM , Rating: 2
quote:
Don't you mean if it caused a "fair" distribution of wealth, it would never be allowed to succeed? http://en.wikipedia.org/wiki/Liberty_Dollar


No I don't. I just mean a "major" redistribution of wealth. Case and point with bitcoins. Ruffly 2% of the bitcoins are publically traded. We have no way of knowing how many people the 98% of the bitcoins that are being hoarded are being held by. But lets say bitcoins became the global currency. Then some small number unknown people would have 98% of the world wealth. I do not who those people would be, but it certainly would not be those who hold major economic power today. Even as one of those persons who does not hold the wealth today, I would object and demand my government do something about the new "kings" and "queens", as they would hold the power to completely wipe out the value of my retirement at a whim, and they would not have the experience to understand the long reaching consequences of their actions.


By docbill on 6/14/2011 9:12:23 AM , Rating: 2
quote:
http://en.wikipedia.org/wiki/Liberty_Dollar


After reading that article about Liberty Dollars, if I were trading in bitcoins I would be concerned about the legality.

I just found out about black markets for bitcoins. It seems like a huge risk for the trading site to do. If bitcoins are classified as a currency, it is probably all perfectly legal. After all, as far as I know there is no law that says I have to announce to the world if I trade USD for CAD or visa versa. I just need to file the appropriate government paperwork. The problem is if it is indeed classified as a currency under the law, then every American which has an account with more than an equivalent of $10,000 USD in bitcoins can fined sent to jail for failing to file a proper TD F 90-22.1 with the IRS. As near as I can tell since the bitcoin banks are not following banking laws, it would be impossible to file a proper TD F 90-22.1. (Although, if one made an honest attempt, chances are they would avoid the penalties and fines.) Most other countries have similar laws to avoid racketeering.

On the other hand, if bitcoins is classified as a stock, then the exchange sites are in violation of trading laws. US citizens & residents owning bitcoins could also be in trouble if they are not filing proper schedule B, and declaring gains in bitcoins as a capital gain.

The last way to classify bitcoins is as token, like a poker chips. The problem is under that classification, participating in the bitcoin market may be a form of illegal gambling...

Really, it is a no win scenario legally. Really, the only the only thing that has allowed it to last this long, is the confusion over which set of laws apply, and the total volume of trading has been below the radar. Especially, when on average the price has been going up, so there are no losers to complain they have been cheated.

The real question just who would be charged should the government go after people on this? I expect it would be those running bitcoin sites, some software developers &/or their employers, and people that could be traced having sold more than some threshold value of bitcoins for legal tender. This could include many bitcoin miners.


By Amincd on 6/12/2011 4:32:36 AM , Rating: 2
"Just imagine this: If the federal US debt was converted to bitcoins generated on an AMD 6950, you would need you'd need roughtly 627 billion BTC (at an exhange rate of $23)."

There can only be 21 million BTC, so rather than 627 billion BTC being created, the 21 million BTC would just see their value increase, and people will be trading microbitcoins (.000 001 BTC) instead of bitcoins.

"So to show how much power that is, wikipedia lists the USA's nuclear power generation as 101,229 megawatts (i'm going to assume that's per hour). Basically you'd have to run all the USA's nuclear power plants for 103 days in order to convert money worth thin air to money worth even less then thin air. Money created out of material debt, instead of metaphysical debt."

Your analysis is based on a faulty assumption about how many bitcoins can be created. The amount of energy devoted to creating each bitcoin would increase though, as there would be a greater need for security as the value of all bitcoins increases, but it would be nowhere near your estimate.

The cost of securing the bitcoins would replace the cost of all of the physical banks with the tens of thousands of security workers, the cost of building huge vaults, and the cost of driving armored trucks around with physical currency.


By icanhascpu on 6/14/2011 5:43:56 PM , Rating: 2
People value faith, so my original comment stands, and is just the simple version of what everyone else is saying.


RE: The ultimate form of nonsensical speculation
By th3pwn3r on 6/12/2011 11:09:56 AM , Rating: 2
Do you not know what drugs are worth?


By MrBlastman on 6/13/2011 10:48:17 AM , Rating: 3
The last time I checked, they are worth prison time... getting pounded in the backside by Bubba.

No thanks.


By NellyFromMA on 6/15/2011 4:40:04 PM , Rating: 2
What's wrong with coffee mugs and drugs? haha jk


Crash
By SpaceLord75 on 6/10/2011 7:14:51 PM , Rating: 2
The current rate on MtGox is now around 24 USD. Marking the high and lows in less than a day isn't a good indicator of anything.




RE: Crash
By JasonMick (blog) on 6/10/2011 7:17:50 PM , Rating: 1
quote:
In trading late Friday, Bitcoins recouped nearly half their losses, bouncing back to 24.34. That's still a massive crash -- around 15 percent in one day. But it shows that the market isn't dead. The U.S. economy survived Black Friday and today sustains a massive amount of wealth. Likewise, perhaps the Bitcoin movement can survive this tough time and find its way. After all -- people are still buying Bitcoins.

($24.34-$28.919)/$28.919 =-15.8%

15.8 percent depreciation IS a major crash. I do note the opening and closing values in my piece, so that's invalid.

You didn't read carefully enough...


RE: Crash
By mira on 6/10/2011 7:21:26 PM , Rating: 2
15% decline following a 70% rise, yeah major depression.


RE: Crash
By JasonMick (blog) on 6/10/2011 7:25:58 PM , Rating: 3
quote:
15% decline following a 70% rise, yeah major depression.

The Great Depression followed a major market rise, as well (which occurred during the "roaring" 20s). Albeit the boom and bust have been much more rapid in the Bitcoin market and we have yet to see if the bust is sustained.

Still a massive market event...


RE: Crash
By Solandri on 6/11/2011 3:13:39 AM , Rating: 2
Not sure why you're being downrated for this. In the windup to the Great Depression, the DJIA dropped 12.8% on October 28, 1929, followed by another 11.7% on October 29. These things do not happen quickly. It took nearly 3 years (til July 1932) for the DJIA to lose 89%. So comparatively, a 30% drop in a day is a massive, massive drop for what's supposed to be a general index/currency.

OTOH, Black Monday, Oct 19, 1987, the DJIA lost 22% in one day. But it bounced right back. So you never know.


RE: Crash
By JasonMick (blog) on 6/12/2011 1:57:35 PM , Rating: 4
quote:
Not sure why you're being downrated for this. In the windup to the Great Depression, the DJIA dropped 12.8% on October 28, 1929, followed by another 11.7% on October 29. These things do not happen quickly. It took nearly 3 years (til July 1932) for the DJIA to lose 89%. So comparatively, a 30% drop in a day is a massive, massive drop for what's supposed to be a general index/currency.

OTOH, Black Monday, Oct 19, 1987, the DJIA lost 22% in one day. But it bounced right back. So you never know.

I assume I got downrated because Bitcoin miners assumed this article was somehow an attack on Bitcoins themselves, rather than an economic commentary.

Quite to the contrary, the fact that I'm addressing this major inflationary event as significant is supportive of the legitimacy of the Bitcoin movement.

The problem is a number of people are very defensive about Bitcoins and their coverage in the media. The humorous part is that they've essentially parroted my commentary on a number of points, while saying that their paraphrased version somehow contradicts my piece.


RE: Crash
By Targon on 6/11/2011 6:51:33 AM , Rating: 2
Considering that most people don't know or care about Bitcoins, that is why no one really cares. It isn't as if there is a huge huge ecosystem that affects the lives of millions of people. While there is a market(primarily in Asia) for buying/selling in-game items and money for online games, no matter how much money may be involved, if it doesn't affect most readers in any way, it's not a big deal.

Basically, if virtual currencies go away, it won't be the end of the world for those who actually make our money in the real world.


RE: Crash
By Suntan on 6/13/2011 1:37:38 PM , Rating: 2
I remember, back when we were kids, we'd get done playing Monopoly and then we'd put the play money back in the box until we wanted to play again.

Sounds like a lot of adults should follow the same procedure...

-Suntan


RE: Crash
By nickwit on 6/10/11, Rating: -1
RE: Crash
By fteoath64 on 6/11/2011 2:59:16 AM , Rating: 4
I think the establishment is trying to sabotage an alternative mechanism of payment. It would weaken the control over monetary flow.

Hence, uses examples of buying illegal drug which can be done in many ways using existing payment systems. Traceability is just an excuse. They wanted to TRACK!.

People need to wake up when governments tries to use FUD to mess around ideas that would NOT benefit them. It is a shame if people cannot see past the BS in mainstream news.


RE: Crash
By Mike Acker on 6/11/2011 6:39:26 AM , Rating: 2
="I think the establishment is trying to sabotage an alternative mechanism of payment. It would weaken the control over monetary flow."

of course

what happened when JFK authorized issue of US Treasury Notes?


RE: Crash
By 91TTZ on 6/11/2011 7:48:36 AM , Rating: 3
quote:
you talk (as so many do) as though the only country in the world that matters is the US. This is 5% of the global population. The rest of us can buy and sell without using USD at all.


You're being intentionally misleading. You make it sound as if the US has a 5% influence in the world because we have 5% of the population. Yet the US dollar influences the economies of many other countries and has a very wide ranging effect.


RE: Crash
By adiposity on 6/11/11, Rating: -1
RE: Crash
By JasonMick (blog) on 6/12/2011 2:18:05 PM , Rating: 3
quote:
Got an agenda much?

So what exactly do you think my "agenda" is? Or do you just prefer some vague and nonspecific aspersion so you don't have to both to articulate an actual thought?

quote:
The bitcoin market has had a slow and steady increase in the number of people/value over a the last couple of months, then there's a sharp increase on one day followed by a slightly smaller decrease two days later, and you call that a "depression"? One day?

Depression/recession... time will tell which it is. Nonetheless, it's a MAJOR inflationary event. Bear in mind, this is a currency drop, not a stock market drop. A 15 percent drop on the stock market would be a massive event -- it's only happened a handful of times on the NYSE. A 15 percent inflation in a currency in a SINGLE day is virtually unheard of... that's an even more noteworthy event.

I'm just observing this from an economic perspective...
quote:
This whole article reads like a desperate hit-piece... ticking every single box that newbies ask about on the forums... only to have them debunked. You're deliberately misunderstanding so people who can't be bothered checking things themselves are misled.

Unadulterated paranoia. How am I trying to "hit" the bitcoin market? I say that I think it will survive this turbulence and point out some valid suggestions for how market stability can be improved. If anything I'm DEBUNKING misinformation.
quote:
So just to clarify:

And here you go on to reiterate the text of my article, and humorously try to claim that it debunks it. Pathetic... Read below.
quote:
1) bitcoin addresses are linked to IP. It's easy to obfuscate IP. Bitcoins can be as untraceable as you want them to be.

Oh really?
Maybe if you read:
"Now this is somewhat misleading in that Bitcoins themselves can be more or less traceable than how the user communicates with uses their IPs. Any time a transaction occurs, it's sent out from an initial IP to nodes on the Bitcoin network, which verify its authenticity."
"As long as the public/private key cryptography scheme is sound, and you anonymize your IP, even the government will have a relatively tough time tracking you. The same can be said about any activity that occurs online."

...So you've parroted me... nice.
quote:
2) the link between bitcoins and drugs is about as serious as the link between cash and drugs. Detractors bring up "drugs" every single time.

When did I suggest that bitcoins are fuel a drug economy? I point this out, only because the Gawker piece and others on the Silk Road have gotten significant attention as demonstrated by the letter from the Democratic Senators...

People want anonymity for a number of reasons. One is indeed disguising illegal activities... one example of which is drugs. Nowhere do I suggest that this is the primary driver of the Bitcoin economy or that it's a major problem.

In fact, my whole point is that it's less of an issue than people think, because any drug traffic is tied to traceable real world material exchanges and thus can be tracked regardless of the currency used.

Possession of illegal narcotics is a crime, no matter if you bought it with bitcoins or USD.

So you're just blowing smoke here, parroting me.
quote:
3) we do not need credit-card-based buying of bitcoins because credit-cards/paypal are prone to fraud.

Errr, money itself is prone to fraud.

Sure peoples' Paypal and CC accounts get stolen, but so do people's money.

If Paypal and CCs were inherently completely insecure, our current economy wouldn't exist. Most people use CCs and get by just fine...
quote:
4) you talk (as so many do) as though the only country in the world that matters is the US. This is 5% of the global population. The rest of us can buy and sell without using USD at all

Err the US controls 14.6T USD of the total global GDP of 58.9T USD... so it controls over a quarter of the world economy. And when you count its deep influence on Europe and China via its powerful banking ties, the U.S. is the world's strongest economic power currently.

So there's some facts -- feel free to try to challenge them if you think your facts are better...

BOTTOM LINE
I don't have an "agenda" other than to clue people in to the Bitcoin phenomena. I think it's a very interesting economic experiment and I hope it succeeds.

Your accusations are pure paranoia and practically comical in that they either fall under the category of easily disprovable nonsense, or you repeating what I said in the piece and trying to claim it shows that I'm wrong.

Take off the tin foil hat and realize that I'm not out to get you. Or keep it on and post back some equally raving reply... it's a free country...


RE: Crash
By docbill on 6/11/2011 9:57:36 AM , Rating: 2
I agree. Even if you look at the week at a whole, there is no down trend. In fact if you look at the volume that traded at the higher value it was extremely small. The average sale price of bitcoins remained fairly stable. If you look since the start of the month, there is still a dramatic increase. If you look at it since the start of the year the increase is unheard of. The real story that the increase in the value of bitcoins has been much faster than the models predict. The reason is unjustified economic speculation. Less than 2% of bitcoins are being publicly traded. So huge changes in trade volumes are possible any given day. Hence, huge changes in price. The fact is a "currency" that increases in value over time, encourages saving, not investment. There will always be a low percentage of bitcoins on the market, so the market will always be very volatile.


RE: Crash
By chetrasho on 6/11/2011 9:22:07 PM , Rating: 2
Good points, docbill. I quoted you in a longer reply:
http://poibella.org/emptyset/?p=324

This whole "depression" thing is nonsense. I'm happy for the lower prices....


RE: Crash
By docbill on 6/12/2011 12:19:15 AM , Rating: 2
I personally would be quite happy to see the price drop all the way to January 2011 values. But I feel bad for those who are speculating on the value of bitcoins. If the goal is currency speculation, it is better to pick something that is backed by a central authority, as at least then you have better chance at predicting the trends. The anonymous nature of bitcoins make it very difficult to determine how they are being used and predict trends. Buying them for investment is about a good idea as betting at the race track without even looking at the spread. Eventually if they stabilize the deflationary value of a bitcoin will probably be just enough so people don't feel like they need to dump them right away after making a transaction, but not so much that they are a good longterm investment.


By Mjello on 6/11/2011 5:14:10 AM , Rating: 2
Not only are you promoting a nonsensical get rich scheme. Bitcoins will never be anything but an oddity since there is an artificial limit to how many can be created.

The system is designed in such a way that early created coins become more and more worth over time. A currency created to make the creators rich. Nothing more.

This is considered gray area when it comes to legality. The legal system just works too slow, so the scheme is probably completed before the court rules.

I wouldn't be surpriced if the authors only purpose is to create more attention to a get rich scheme he is part of.

I do however think that the creators of this scheme is kind of genious. Way better than the usual pyramid schemes. Here you don't even have to bother with a product. Just make people create it themselves LOL.

Byebye for good dailytech. I will select tech news sites to avoid you.




By Ringold on 6/11/2011 2:58:47 PM , Rating: 1
Yeah, disappointed me a good bit to learn one of the leading bitcoin sites (it's linked to in its wiki) was DT's founder.


By KristopherKubicki (blog) on 6/11/2011 4:21:56 PM , Rating: 2
Yeah... I wouldn't call my calculator a leading bitcoin site. For me it was a fun math exercise.

Here's my bitcoin bank account:

http://blockexplorer.com/address/1Pb5KzHVgDyVsnVsf...

And yes, I do math for fun... :(


By Amincd on 6/12/2011 4:19:18 AM , Rating: 2
" Bitcoins will never be anything but an oddity since there is an artificial limit to how many can be created."

There will be 21 trillion microbitcoins created, which will each be divisible to two decimal places. That's enough units of exchange for internet commerce.

"The system is designed in such a way that early created coins become more and more worth over time."

Early coins are worth no more than later coins.

"This is considered gray area when it comes to legality. The legal system just works too slow, so the scheme is probably completed before the court rules."

How is someone creating a product and other people freely deciding to buy it or use it illegal? People like you just love government tyranny and control over other people. You would have liked the Stasi in East Germany.

"I wouldn't be surpriced if the authors only purpose is to create more attention to a get rich scheme he is part of."

Talk about paranoia.

"Way better than the usual pyramid schemes."

From 'Bitcoin Myths':

https://en.bitcoin.it/wiki/Myths#It_s_a_giant_ponz...

It's a giant ponzi scheme

In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.

A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters profit from the usefulness of a stable and widely accepted p2p currency.


By Rob Lister on 6/12/2011 8:56:38 AM , Rating: 2
Like a few folks here, including the writer of the original article, you seem to get it without really getting it. You're schizophrenic on the issue. For example, you write,

quote:
Not only are you promoting a nonsensical get rich scheme. Bitcoins will never be anything but an oddity since there is an artificial limit to how many can be created.


and in the very next sentence, you write:

quote:
The system is designed in such a way that early created coins become more and more worth over time.


Which is it? I'm guessing you really don't grok the concept of currency, and certainly not the technology behind this particular currency.


By BansheeX on 6/13/2011 3:17:14 PM , Rating: 2
He apparently doesn't realize that the first 150 years of the USA operated under a deflationary currency after the quick inflationary destruction of the continental dollar. In fact, the highest rates of GDP growth this country has ever had was in the early 1900s. Fiat currencies are a scam that unfairly benefit their issuers. It's perfectly natural for a product serving as money to appreciate and depreciate with supply and demand. Nobody hoards money indefinitely, money is a trade facilitator. If they're hoarding, it's because there is a greater need for savings from which real loans come. If everyone had a shovel and just consumed what they produced, we would never have bulldozers. The crash of 1929 was only that severe because of the inflation that preceded it, but rather than recognize the "rise" as the problem, people saw the "withdrawal" as the problem needing fought. Because the drug felt good and the withdrawal felt bad. Government meddling then prolonged the agony for more than a decade.


You are a vary Stupid man
By echoblack on 6/10/2011 10:37:12 PM , Rating: 2
WOW, you are all idiots. You don't even know how something works, and then you write a whole article displaying your stupidity.

Educate yourself before you make a fool of yourself.

- Bitcoin White Paper -
http://www.bitcoin.org/bitcoin.pdf

The "Block Chain" is a hash tree. Each transaction is validated against the Block chain by the Bitcoin Minters. Each new block crated validates all transactions that have happened after the last block that was created, and because it is a Hash Tree it re-validates all transactions that have ever happened before.

Each Node experts the Longest "Block Chain" (hash tree) at the legitimate one. So, for someone to subvert the block chain they would need to Re-compute the entire blockchain + have the power to keep up with the block chain as it grows. In order to do this the Attacker would need much more power then the entire bitcoin network. Which at the time of the writting is 83.191 PetaFLOP/s. That is more computing power then ALL of the Top 500 Super Computers put together.

If one could control more then 50% of the bitcoin network. Sents there computing power would be added to the network, the Attacker would need MORE THEN 83.191 petaFLOP/s to have more then 50% of the network. As I said before, that is more then All the top 500 Super Computers in the world all working together.

That is why there is so much power devoted to bitcoin. That is security, Math.

Also, by not just giving out bitcoin the fact that you can NOT make them out of thin air like Fed Note are. They actually have value that can not be reproduced or counterfeited. The take real money to produce that will always give them value.

As for not finding someone to buy your bitcoins. That is just ridiculous, there has been 91,336.41 Bitcoins Sold in the past 24hr's on MtGox and 3,179 on bitomatPLN and 2,175.37 on thUSD. I personally have made over $10,000 USD in my bank account form mining and day trading bitcoins. I also pay for my VPS with bitcoin and my Anonomus Off-Shore VPN account with bitcoin.




RE: You are a vary Stupid man
By havoti97 on 6/11/11, Rating: -1
RE: You are a vary Stupid man
By skywire on 6/11/2011 1:08:12 PM , Rating: 5
backed in full-faith by the United States Government
You really have no idea what they means, or what it does not mean, do you? US dollars are not "backed" in any sense of the word that you will find in any English dictionary. The US government makes NO promise to give you anything in exchange for them. And experience shows that the ONLY thing the US government does with respect to them is create more out of thin air, diluting the value of the existing pool.


RE: You are a vary Stupid man
By RivuxGamma on 6/11/2011 1:34:44 PM , Rating: 4
quote:
Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.


That's from the US Treasury's website: http://www.treasury.gov/resource-center/faqs/Curre...


Bitcoin economy
By jostmey on 6/10/2011 7:20:28 PM , Rating: 2
I'd like to point out that bitcoins are not just a currency for traders. There exists a plethora of merchandise and services that can be purchased with bitcoins. Many articles have reported that some people buy drugs with bitcoins online through silk road. But bitcoins are and always were bigger than silk road. You can buy just about anything with bitcoins. To prove this point, a handful of sites have popped up that aggregate all items and services that may be purchased using bitcoins (example searchbitcoin.com). Obviously, the bitcoin economy is strong and growing.




RE: Bitcoin economy
By JasonMick (blog) on 6/10/2011 7:30:56 PM , Rating: 1
quote:
I'd like to point out that bitcoins are not just a currency for traders. There exists a plethora of merchandise and services that can be purchased with bitcoins. Many articles have reported that some people buy drugs with bitcoins online through silk road. But bitcoins are and always were bigger than silk road. You can buy just about anything with bitcoins. To prove this point, a handful of sites have popped up that aggregate all items and services that may be purchased using bitcoins (example searchbitcoin.com). Obviously, the bitcoin economy is strong and growing.

Yep... I allude to that here...
quote:

However, market volatility poses a very serious risk to BTC users -- be they miners, traders, or merchants who accept BTC as payment for goods or services.

Clearly, though the market growth may be slowed by the wild swings in value....which is why today's events are very important and must be considered.


RE: Bitcoin economy
By Ringold on 6/11/2011 2:53:02 PM , Rating: 2
quote:
Clearly, though the market growth may be slowed by the wild swings in value....which is why today's events are very important and must be considered.


Yes, a currency that fluctuates like that would make business difficult to say the least. Real-world currency movements aren't nearly so volatile, and still hedging currency risk is a huge concern for multinationals. They couldn't possibly handle volatility of this magnitude.

Of course, that's just one problem with the currency so far. I've brought it up to a number of fellow economists, just making sure I'm not missing something, and so far its been fairly unanimous that bitcoin SHOULD be a flash in the pan. It reads as if its something created by an engineer that had a woody for gold but no solid economic or financial education or background.

But more important, for me, than economic arguments against it is that it very much appears to be a get-rich-quick scheme by early adopters. I doubt it started that way, but people that've been mining bitcoins with farms of HD 6990s for weeks or months must be messing their pants.

Not that its a clear-win for them, either.. If too many cash out too quick, or even if a single large player tries to cash out too quick, it could topple the whole market with its low liquidity.

But whatever, I'm just pissed I can't afford to gamble and buy a couple HD6990s myself. While it may be a scam, I'm not above taking advantage of fools too while the gettin' is good. :P


ummm..
By kleinma on 6/11/2011 3:18:01 PM , Rating: 3
Black Friday is an annual shopping day. Black Tuesday/Thursday was the stock market crash of 1929

http://en.wikipedia.org/wiki/Black_tuesday

http://en.wikipedia.org/wiki/Black_Friday_(shoppin...

As far as I know the only place Black Friday was related to the stock market was in Europe (Black Thursday in the US)




RE: ummm..
By CZroe on 6/12/2011 11:58:56 AM , Rating: 2
"Much like the New York Stock Exchange, Bitcoin exchanges have suffered from their first massive loss -- a virtual 'Black Friday', so to speak."

The "Black" in "Black Friday" means that retailers started to make holiday-season profits as opposed to being "in the red" most of the year, so it's a good thing. You know... black vs. blue ink on a chart. Because profits on stock exchanges are only indirectly related to the influx of holiday spending, it doesn't relate to them the same way (they don't bleed red most of the year in anticipation of holiday shopping season). In that context, black = doom and gloom.

Mixing it up with Black Friday is pretty silly.


Convert electricity bill to bitcoins?
By kensiko on 6/10/2011 8:12:21 PM , Rating: 2
So if I understood correctly, you can "earn" bitcoins by making your AMD GPU find some numbers?

If that's so, the process probably takes some GPU horsepower to process, and that costs electricity.

In all of that, you just convert what you pay in electricity to bitcoins. I don't know how much you get in bitcoins for each dollar but all that things seems ridiculous.




By Rob Lister on 6/12/2011 9:28:09 AM , Rating: 2
It does seem a bit arbitrary but it is less so than you might think. In reality, you're converting CPU cycles to currency, not electricity. Of course, CPU cycles require electricity but if you can run your computer on jelly beans, that would work just as well.

Requiring CPU cycles for mining Bitcoins is necessary technologically. If you are technologically minded, you can read the white paper to understand why. In a nutshell, it ensures that honest brokers are always more profitable than dishonest brokers; attempting to defraud is less profitable than validating honest exchanges.

It is really quite cool.


herpderp
By iherpandiderp on 6/10/2011 9:26:32 PM , Rating: 2
Bitcoins will fail because they aren't backed by anything. Everyone knows this. Nevertheless, you are aware that the mtgox market has fluctuated like this several times, right? Oh, nope. You just glommed onto the bitcoin reporting of late, saw that there was a big dip today, and reported "Oh, noes, bitcoin is in failing!". Maybe they are in failing. But, the market has behaved like this since they were trading for cents and look where it is now. Don't derp so much please. kthnx.




RE: herpderp
By poi2 on 6/11/2011 4:04:30 AM , Rating: 2
* = bs

I don't know why some ppl saying about backed by * Oh is that rules created by ppl and test/used it for a range of years ? So the backed by * theory is used, then based on that theory there is not enough funds, then some groups of ppl created another * by selling debt bonds... and then what ? when there is not enough * another * showed up.
If then in few hundres years some groups of ppl successfully colonize another planet and that planet doesn't have that * backed by * thing. I bet another * will be created again. And a new rules will created again ? And what if that * witch is backing everything runes out ?
I personally love to see where these new system going, it's interesting theory. Somehow it fits with 2K era. And still under real-world testing.


Black Friday?
By lordylordy on 6/11/2011 6:58:06 AM , Rating: 4
"Black Friday of Bitcoins - The Depression Begins" is oh so much more exciting that "Bitcoin Prices Fall Back To Where They Were Three Days Ago"




Really?
By tng on 6/11/2011 11:36:57 AM , Rating: 2
quote:
But, wait let's not get ahead of ourselves. Why should anyone care if the Bitcoin market crashed?

That is the question isn't it.

If the whole bitcoin economy failed, crashed and burned, all the servers they exist on literally exploded, would the average person on the street care? No.




RE: Really?
By Rob Lister on 6/12/2011 9:17:06 AM , Rating: 2
And yet, here you are caring at least enough to comment on it. The fact that Sens. Charles Schumer of New York and Joe Manchin care enough to be openly critical of it tells me that it is a real threat to them and that they care. They may not understand it, but they care. Do you think someone pressured paypal to suspend service? I do, but clearly paypal cares too, for whatever reason.

Anyway, their criticism makes me more bullish than ever.


E-Gold
By wizxoo on 6/11/2011 12:10:05 AM , Rating: 2
Sounds like another E-Gold to me. The stupid US Government shut them down, I still ahve $400+US in there that I can get out. To heck with that digital currency nonsense.

online-privacy.no.tc




"Inflation"
By trajan on 6/11/2011 1:17:34 AM , Rating: 2
I laughed a little every time the word "inflation" was incorrectly used in the article (which is every single time), until it stopped being funny. This is actually mildly interesting news, albeit not remotely as dramatic as it sounds. But reading a tech writer attempting to write about finance is *painful*.




Update
By NullSubroutine on 6/11/2011 9:39:57 AM , Rating: 2
As of like 830 CDT it was at like $15.




Small market
By Amincd on 6/11/2011 10:54:37 AM , Rating: 2
For any traded item with a small market, volatility is unavoidable.




Moral hazard
By nedguy on 6/11/2011 4:55:54 PM , Rating: 2
The best thing about Bitcoins is: No central bank/issuer & no govt backing - which means no "moral hazard".

If ever the spivs and gamblers of Wall St & City of London start gambling large scale, they'll have to take their chances in a 'Black Friday' situation just like the ordinary folk who have to bail them out IRL.

Result :)




By GeorgeOu on 6/11/2011 10:48:44 PM , Rating: 2
The price of Bitcoins since April 2010 has balloned over 9000 fold. This is an indication of people trying to cash out even a small amount can trigger a dip like this.

http://www.hightechforum.org/bitcoins-a-crypto-gee...




By Rob Lister on 6/12/2011 9:04:19 AM , Rating: 2
The reporter seems to kind of get bitcoin without really 'getting' it. He writes:
quote:
However, market volatility poses a very serious risk to BTC users -- be they miners, traders, or merchants who accept BTC as payment for goods or services.


Which is true if you're a speculator but not otherwise, but whatever. Then he writes:
quote:
To that end, a major improvement would be for Bitcoin exchanges to implement mandatory market closures if the currency value dropped below a threshold.


That shows you don't grok it. Without a central authority for the currency, there can be no central authority for the exchange. Anyone can create an exchange on a whim, and close it or not close it as each sees fit. You may think that is a good thing or a bad thing. It doesn't matter what you think.




Bitcoin
By znmeb on 6/12/2011 8:11:25 PM , Rating: 2
1. The fact that it's possible , by whatever circuitous routes, to exchange Bitcoins for United States Dollars, means that these transactions are governed to hundreds of thousands of lines of US and international legislation.

2. I wonder if the sudden "rush to cash in" Bitcoins had anything to do with the arrest of three hackers in Spain.




Market crashes
By whitslack on 6/12/2011 10:12:08 PM , Rating: 2
quote:
Vast amounts of wealth were wiped out in an instant.

A market crash doesn't wipe out wealth any more than a market explosion creates it. If I buy 50 BTC one week for $1000 USD and sell them the following week for $500, you would say $500 worth of wealth has been destroyed. But you are ignoring Frédéric Bastiat's "that which is not seen." I shall explain.

At the start of the scenario, I have $1000 USD and Joe has 50 BTC. I give my $1000 USD to Joe, and he gives his 50 BTC to me. The $1000 still exists, and the 50 BTC still exists; they have just traded hands. Now the price of Bitcoin falls. I sell my 50 BTC back to Joe for $500 USD. Now Joe has $500 USD and 50 BTC, and I have $500 USD. No wealth has been destroyed; everything that existed at the start still exists, no more, no less. Exchanges are a zero-sum game, so it's impossible for them to create or destroy wealth.




It wasn't a depression
By Raptorblaze on 6/12/2011 11:42:23 PM , Rating: 2
Looking at all the statistics, the only one of any significance which dropped was the price, and even that has recovered most of the way. If this was a depression, the bitcoin prices would be on a decline for a long period of time. Not to mention that @bitcoinanalyst on twitter completely predicted the shift in price. A lot of us knew it was coming. Also I believe you mean to "black tuesday" not "black friday"




ns1.xta.net
By cryptographrix on 6/13/2011 8:20:50 AM , Rating: 2
The DNS server for their site is also the same DNS server for "silkroadmarket.com" which is where this whole war against bitcoins started:

http://www.who.is/nameserver/ns1.xta.net/3/

Page 2 has mtgox.com.

This is propaganda, done really stupidly.




neal stephenson
By nafhan on 6/13/2011 10:07:46 AM , Rating: 2
Jason, any chance you could use your mighty, mystical, journalistic powers to interview Neal Stephenson on this? I'd love to see his opinion... This sounds like something straight out of his imagination.




By blooder90 on 6/14/2011 7:41:16 PM , Rating: 2
Check out this new BitCoin exchange website - https://bitcoin7.com/ - it just opened up and the rates are like two times smaller than MtGoxs'! At the moment they are even paying you when you make an exchange as part of some promotion!




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