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Friday's Big Swings, Mostly Down, Illustrate Bitcoin Value Volatility

timothy posted more than 3 years ago | from the still-exploring-this-cave dept.

Bitcoin 476

An anonymous reader writes "As cool as Bitcoin is, it looks like it lost 1/3 of its value in the last 24 hours. Lots of big sells, complaints of liquidity, and pissed off nerds." The linked article goes on to explain that the value rose again, so the aggregate loss was considerably less. The author also helps defuse claims that Bitcoin is untraceable or otherwise especially well suited to nefarious activities.

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Volatility (1)

burisch_research (1095299) | more than 3 years ago | (#36410728)

Just plummeted from $20 to $13 in about 5 minutes. Now, not 30 minutes later, it's back to $19.5. Go figure.

Re:Volatility (2)

drinkypoo (153816) | more than 3 years ago | (#36410758)

Aren't there still relatively few bitcoins in existence? Shouldn't this particular problem become less severe with time?

drinkypoo the troll exposes himself as a troll? (-1)

Anonymous Coward | more than 3 years ago | (#36410802) []

Why'd you run from a simple question there, drinkypoo? Perhaps because it exposes you for the trolling scum you are?? Absolutely.

The funniest part is that when you search google for slashdot site queries on drinkypoo, all of these questions drinkypoo runs from show up, exposing you for what you are - a troll.

(Hilarious: You're exposing yourself to the planet as a troll, drinkypoo, just by running away from that question in the link above, and the more you run from answering it, the more of the troll you obviously are becomes apparent).

Re:drinkypoo the troll exposes himself as a troll? (-1)

Anonymous Coward | more than 3 years ago | (#36410910)

Go fuck yourself, APK. Or get an account and fucking do it right. If you won't bother getting an account so you can take advantage of the moderation system, stop bitching about how comments are modded.

Awww, poor drinkypoo runs from a question (-1)

Anonymous Coward | more than 3 years ago | (#36411092)

A question that exposes him as a troll here [] and now he has a fit spouting profanities because he was stupid enough to troll others and think he could get away with it. Now he's being "re-trolled" and as anyone can clearly see? He has a hissy fit like a little child, lol! What's the matter troll?? Can't handle being trolled yourself???

drinkypoo you can't even own your own mistakes (-1)

Anonymous Coward | more than 3 years ago | (#36411120)

drinkypoo you trolled him in that link he put up and you're not man enough to face that it seems since you evade answering it. You've only embarassed yourself drinkypoo planetwide on google site queries where that has been showing up today. Now that you're being retrolled yourself, you cry like the trolling beyotch you are? Give us a break, troll. Not only are you an embarassment to this website, but you are to yourself.

Re:drinkypoo the troll exposes himself as a troll? (-1)

Anonymous Coward | more than 3 years ago | (#36411194)

Drinkypoo's embarassed. Look @ that profane reaction. Hahahaha.

Re:Volatility (2)

mmcuh (1088773) | more than 3 years ago | (#36410832)

You can transfer tiny fractions of a bitcoin, so the number of bitcoins in existance isn't that important for liquidity. It's not like a stock.

Re:Volatility (1)

timeOday (582209) | more than 3 years ago | (#36411044)

I think the point is there aren't that many people who actually care what the value is so it isn't very strongly tied to anything real.

Re:Volatility (1)

KingBenny (1301797) | more than 3 years ago | (#36411084)

pissed off nerds are nerds, nerds are pretty much plain human who got the wrong side of the ladder up their as$, that's why you should only go with geeks if you want a realistic appreciation of possibilities

Re:Volatility (3, Informative)

osu-neko (2604) | more than 3 years ago | (#36411072)

You can transfer tiny fractions of a bitcoin, so the number of bitcoins in existance isn't that important for liquidity. It's not like a stock.

Right. The important number is the number of bitcoin traders. Stable markets are relatively stable because they have a large number of buyers and sellers. Liquidity isn't a problem when there's always lots of people looking to buy. When there's relatively few people in the market, it's easy for someone trying to sell to quickly chew through all the buy offers at or near the current rate. If they still want to sell more, price begins dropping precipitously as they can now only sell to people who put in relatively low buy offers, since they've exhausted everyone who wanted to buy near the market rate. Taken far enough, you can complete exhaust all the open buy offers, at which point your liquidity hits zero -- you can't sell if no one is buying. The problem is the size of the market...

Re:Volatility (0)

Anonymous Coward | more than 3 years ago | (#36410876)

There will ALWAYS be relatively few Bitcoins. Strangely enough, that is one of the scheme's major selling points. The group of people who think Bitcoin is a good idea and the group of people who think abandoning the gold standard was a bad idea have huge overlap.

Re:Volatility (3, Insightful)

betterunixthanunix (980855) | more than 3 years ago | (#36411106)

Right now, we are in a bitcoin speculative bubble. The bubble will burst eventually, and then bitcoins will be worthless, since there is no ultimate source of bitcoin value. Nobody can pay their taxes with bitcoins, and hence nobody needs bitcoin -- compare with the US Dollar, which America citizens need in order to pay their taxes, and which American bitcoin holders will likely try to trade their bitcoins for when tax season rolls around.

To put it another way, it is about demand, and the demand for bitcoins will not be very high in the long run (unless a government somewhere starts accepting bitcoins for tax purposes).

Re:Volatility (2)

Khyber (864651) | more than 3 years ago | (#36411270)

This is known as the 'bull trap' period.

Re:Volatility (0)

Anonymous Coward | more than 3 years ago | (#36410760)

not surprising, the number of bitcoins is very low. the number of bitcoins traded is even lower so even small trades have a huge effect on the value of bitcoins.

Re:Volatility (1)

bondsbw (888959) | more than 3 years ago | (#36410810)

I wanted to buy a few at $7 a couple of weeks ago. Any way you look at it, high price or low, I would have come out way ahead if I had.

Re:Volatility (2, Insightful)

Anonymous Coward | more than 3 years ago | (#36411052)

Any way you look at it, high price or low, I would have come out way ahead if I had.

This is the fallacy that gets people into so much trouble participating in speculative bubbles. "If only I had bought low, I surely could have sold high!"

The nature of speculative bubbles means that most of those who buy low don't sell high. The collapse may happen too suddenly. Or your attempt to sell may even trigger a crash before you can find a buyer. They always have to pop, for the exact same reason that pyramid schemes can't make the whole world rich. It's a kind of gambling game, like playing chicken vs. an invisible wall.

If you had put your $7 in, you might well be thinking now, "It's only $7. I can afford to lose that. But what if it goes to $1000? It's worth hanging on just in case." or when the value dips under what you paid, "Surely it will recover. It was a good bet when I bought in before (I could easily have cashed in for several times my investment, if I had wanted), so I might as well put $100 in -- I might become a millionaire!"

You might call these stupid moves, but there's no move more stupid than buying into the game in the first place. Inflation and collapse of the bubble are entirely unpredictable, and the odds are stacked heavily in the favor of the initiators of this scam.

Re:Volatility (-1)

Anonymous Coward | more than 3 years ago | (#36410838)

Fat people eat too much. They spend a long fucking time at delis and service counters everywhere just to make up their mind about a subject they already know so well, which is what to eat. They are oblivious fucks to the line of other customers they are rude to. They take up too much space, another thing they are very good at. Oh yeah fatty, another thing, you aren't fooling anybody - we know you soak yourself in excessive amounts of perfume and cologne because you have serious body odor problems.

And for some reason fat black women (and black women aspiring to become fat) just love the fuck out of crab legs. If you were fishing for them this is what you'd use as bait. I guess maybe some famous fat black woman like Queen Latifah must have ordered crab legs in one of her many mindless sitcoms and B movies. Now the rest of them follow along, marching in lock-step, not really knowing why they suddenly love crab legs but definitely not questioning their newfound taste, merely satisfying it. Like good little consumers. Those little ocean scavengers really please the African woman's palate in any case.

We've seen this sort of hive mind before. At the turn of the century black people everywhere went from pronouncing "r" like "are" to pronouncing it like "arre-uhh". Suddenly that was the (New) Black Way to pronounce it. I do mean at 11:59pm one day none of them did that, then at 12:00am a minute later millions of em did it. Pretend not to notice if you want, or be a crybaby and worry about if it's PC, but that's pretty damn strange. Even ants and bees have difficulty with such large-scale coordination owing to the limitations of their chemical messages.

Any small market will be volatile (1)

Colin Smith (2679) | more than 3 years ago | (#36410990)

But Bitcoins? Who gives a fuck?

Go buy some silver coins, at least when the US government and Federal Reserve are done fucking the dollar over you'll be able to spend them.

Re:Any small market will be volatile (1)

h4rr4r (612664) | more than 3 years ago | (#36411114)

No you won't. Who will take them?
Who will be testing to see if they are real?

If the economy collapses that far foreign currency will be used long before gold or silver. Even then, expect prices to be very high as demand for good will be much higher than demand for stores of value.

Re:Any small market will be volatile (1)

hsmith (818216) | more than 3 years ago | (#36411240)

Ugh, the point isn't that you trade with silver, the point is that silver is a medium you can use to obtain other currencies.

Re:Any small market will be volatile (1)

LibRT (1966204) | more than 3 years ago | (#36411278)

Interestingly, Utah passed the Legal Tender Act of 2011, which recognizes gold as legal tender []

"Utah just became the first US state to recognize gold as legal tender. Its Legal Tender Act of 2011 allows U.S. minted gold and silver coins to be recognized as legal tender in the value that reflects the market price for gold and silver.

“If the federal government isn’t going to do it, then we here in Utah ought to be able to establish a monetary system that would survive a crash if and when that happens,” Lowell Nelson, interim coordinator for the Campaign for Liberty in Utah, told NYTimes.

Craig Franco, a coin dealer south of Salt Lake City, said he’s preparing to create a Visa credit card based on gold depositories that would allow people to more conveniently use gold as tender."

Re:Any small market will be volatile (1)

NoNonAlphaCharsHere (2201864) | more than 3 years ago | (#36411186)

My wife keeps saying this, but at ~35 dollars an ounce, I think it's already a bubble price. Serious question: what's the real price of silver, in say, movie tickets or bags of groceries, and what's it going to be 18-24 months from now?

Re:Any small market will be volatile (1)

bill_mcgonigle (4333) | more than 3 years ago | (#36411296)

My wife keeps saying this, but at ~35 dollars an ounce, I think it's already a bubble price. Serious question: what's the real price of silver, in say, movie tickets or bags of groceries, and what's it going to be 18-24 months from now?

In 1964 a silver quarter bought a gallon of gas. Today it buys not quite two gallons of gas. Given all the advancement in exploration and production technology, this is about right. Just like computers get cheaper with better technology and higher production, all commodities follow the same trends, only computers are advancing at such a rate that their improvement (and thus prices) can outpace the rate of inflation.

Interestingly, average wages are only 10x of what they were in 1964 while commodities, like silver are up 25x or so. If the currency had been kept sound, today's wages would be seen to have decreased by about 60%. This is the erosion of the middle class that the Federal Reserve helps hide by inflating the Dollar.

Bitcoin is worthless in the long run (1)

betterunixthanunix (980855) | more than 3 years ago | (#36411076)

There is a reason for the volatility: bitcoins have no real value. The only reason you can get dollars (or other currency) for bitcoins is that we are currently in a speculative bubble. At the end of the day, bitcoins do not have any real economic value, because unlike other currencies, nobody needs bitcoins. Unlike, say, the US Dollar, you cannot use a bitcoin to pay your taxes.

When someone can point me to the source of value for bitcoins, and demonstrate why bitcoin holders won't start dumping their bitcoins when tax season rolls around, I might adopt a more positive attitude about the project.

Re:Bitcoin is worthless in the long run (0)

Anonymous Coward | more than 3 years ago | (#36411258)

Some people are accepting BitCoins for products. No currency holds any value except for spculative value. Yes, something like Taxes offer a really strong base, but there is no reason that, given BitCoins manage to reach a point where enough people accept them, they could gain enough traction to be stable as a currency. If enough people accept it, then they become the backers.

Re:Bitcoin is worthless in the long run (1)

TheRaven64 (641858) | more than 3 years ago | (#36411284)

Exactly. Currencies of any kind have value for one reason and one reason only: people have confidence that they can trade them for something that they value. If I sell you something in exchange for some dollars, euros, yen, or little lumps of precious metal, then I'm confident that I can later exchange these tokens for something of approximately equal value later. If I took some kind of commodity in exchange (gold and silver are popular, but almost any commodity works equally well - the earliest recorded currency was based on wheat) then I'm confident that I can trade them later because people have a real need for these commodities. If I take some government-backed currency in exchange, then I'm confident that I can trade it later because the government accepts it in payment for taxes. If I take shares in a company in payment, then I'm confident that I can trade them because they company produces goods or services that people need, so has value. If I take bitcoins... I have no reason to believe that I'll be able to trade them.

The only reason people buy them now is that they believe that they can convince someone to pay more for them later. That's probably a good gamble in the short run, given how much press attention bitcoin is getting recently, but in the long run there's no reason to hang on to bitcoins. As soon as the speculators leave the market, the investors are going to find that they are left with something that has a value reflecting what backs it: nothing.

I don believe in it. (5, Funny)

For a Free Internet (1594621) | more than 3 years ago | (#36410748)

I think it is weird and irrational that we should let our lives be determined by a totally imaginary thing, this "value," where all wants and needs are collapsed into one measure, "value" and its accumulation. Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works, not some silly thing on the internet that is really just an electron representing some fucked-up historically determined concept for which millions starve and a few prosper.

Re:I don believe in it. (1)

Jeff DeMaagd (2015) | more than 3 years ago | (#36410762)

+1 - Beautiful sarcasm.

Re:I don believe in it. (1)

david.given (6740) | more than 3 years ago | (#36410848)

Depressingly I've encountered people who would think he was being serious.

Re:I don believe in it. (0)

Anonymous Coward | more than 3 years ago | (#36411264)

Go to any Sarah Palin or Tea Party rally. You'll find THOUSANDS.

Dollars... real dollars (2)

ka9dgx (72702) | more than 3 years ago | (#36410820)

What years were your dollars coined in? ;-)

Don't you just love that silvery ring when you hold them in the center, and tap the outer rim?

Re:Dollars... real dollars (4, Funny)

For a Free Internet (1594621) | more than 3 years ago | (#36410860)

Yeah exactly! Heavy, shiny metals were made by God to count and represent our worth to society and ourselves. It is so obvious that it requires no proof. Whereas wood pulp, that is fake value, it only exists in your head, I don't care WHOSE picture they print on it, even if it was Jesus giving George Washington a handjob while Abraham Lincoln and Adam Smith watched from behind a peephole!

Re:Dollars... real dollars (2)

fuzzyfuzzyfungus (1223518) | more than 3 years ago | (#36411254)

But what if it was the Maries(Virgin and Magdalene, respectively) performing a sapphic poledance on the cross for an appreciative crowd of early american revolutionary notables? Surely that would give even the hollowest of hyperinflated fiat currencies some value?

Re:Dollars... real dollars (2)

For a Free Internet (1594621) | more than 3 years ago | (#36411312)

That sounds like some kind of Popery nonsense to me, and we all know that America is great because of the Protestant work ethic that we beat into our slaves, not some hierarchical mystical mumbo-jumbo.

Re:I don believe in it. (5, Insightful)

baldass_newbie (136609) | more than 3 years ago | (#36410890)

I have some tulips for sale.

Re:I don believe in it. (3, Insightful)

History's Coming To (1059484) | more than 3 years ago | (#36410996)

So if I buy some of your tulips for $10 there will be somebody else who will buy them from me for $100? Clever!

Think it'll work with houses too?

Poocoin (4, Funny)

goombah99 (560566) | more than 3 years ago | (#36410962)

I Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works.

I'm now selling my poo as a currency. Like bit coin it can only be mined at a steady rate so it can't be manipulated. My Poo is marked with my DNA so it can't be forged for less than it costs to make. It's Natural, and a work of Man.

Now rather than transport it to you in all it's glory, I have established a Poo Reserve. The Poo holding company issues signed electronic Goombah Poo Reserve Demand notes ("poocoin") backed, as gold once backed the dollar, with Poo, redeemable on demand of actual Poo.

I am also setting up the first Poo National Bank. The bank will accept deposits of your electronic Poo Demand notes. It even pays interest on your deposits.

The Bank will also manke loans against it's deposits. So you can take out a loan at a very modest interest rate, all payable in Poo Demand Notes.

What happens next is easy to anticipate. People will Borrow Poocoin and pay off their debts for goods and services. The people paid off, will naturally want to earn some interest so they will pretty much all deposit the poocoin back in the bank to get that interest rate until they need to spend it on something. IN the mean time, with all those fresh deposits, the bank can now make new loans.

After a time T, the total poocoin deposited in the bank has now doubled. The total amount of Poo has not doubled. But what has happened is there are the Liabilities (Deposited Poocoin) and the Assets (borrowed poo coin), that cancel allowing the effective amount of Poocoin in circulation to have doubled.

And pretty much every time T after that the assets and liabilities both grow by the same amount. forever. the BM2 money supply grows without bound even the BM1 amount of the intiall Poocoin the bank had has not changed.

Everything is fine unless of course too many of the people want to withdraw their deposits at the same time. Then unless all the loans can both be called and people can pay them instantly, there is a collapse.

Just like bitcoin but more natural and actually backed by something real and tangible, not "electronic work". You can redeem poocoin for manure but you can't redeem bitcoin for anything.

Holy Crap (0)

Anonymous Coward | more than 3 years ago | (#36411002)

Where can I buy this poocoin while it's still cheap?

Re:Holy Crap (1)

goombah99 (560566) | more than 3 years ago | (#36411104)

Send me your paypal address and I'll invoice you for a baggie. I'm going to toss in a free bag of mucous for the first 1000 customers, so don't delay.

Re:Poocoin (4, Funny)

ColdWetDog (752185) | more than 3 years ago | (#36411028)

What a shitty idea.

Re:Poocoin (1)

Arbition (1728870) | more than 3 years ago | (#36411110)

Seems more like you are comparing bitcoin to the gold standard than to most usual currencies. Of course the statement that bitcoins doesn't really get you goods (well you can, but those are usually indexed against the USD, so that is effectively meaningless) is still a fair one.

It's true, many things are unique and tradable (1)

rubypossum (693765) | more than 3 years ago | (#36411230)

but still worth shit.

The value comes from whether or not someone accepts it as valuable, period. Dollars happen to have a lot of people convinced at the moment, but that will change, empires rise and fall, one day they will become worthless to everyone except collectors. So I for one salute you in attempting to sell your shit as currency. Good luck with that.

Bitcoins are more convenient than trading sacks of shit. And they happen to be more convenient than trading dollars too. So I really hope that Bitcoin can be given a chance as a currency. It would be great for my business (100% freelance online developer.)

Bitcoins teach us a lesson. (1)

mykos (1627575) | more than 3 years ago | (#36411196)

Even if bitcoins fail, it will be a success in that at least a few more people will think about what's wrong with the Federal Reserve.

Re:Bitcoins teach us a lesson. (4, Funny)

For a Free Internet (1594621) | more than 3 years ago | (#36411260)

Yeah exactly! Why should the government try to regulate the market of values? Everyone knows that the market knows best because commodity production for the accumulation of value is bound to make everyone happy in the long run. It's human nature, after all. I learned that from Robinson Crusoe, which proves it. If the government would just let me beggar my neighbor in peace then we would all become wealthier, or at least as wealthy as we deserve to be. But now you've got these socialists in power who are all about fixing the game to help the poor against the rich, when everyone knows that they are poor because they are lazy and don't contribute to society, probably because they are genetically inferior or something scientific like that.

roller coaster ride (1)

molecular (311632) | more than 3 years ago | (#36410756)

if you have bitcoins, just hold on for the ride

Re:roller coaster ride (1)

gclef (96311) | more than 3 years ago | (#36410782)

If everyone's hoarding them, then there will be very few transactions, which will only increase the volatility. If you want to stabilize the economy, use them.

Re:roller coaster ride (1)

IamTheRealMike (537420) | more than 3 years ago | (#36410844)

Indeed. There are lots more merchants these days, which is impressive because the software is still pretty rough. One I recommend is SpendBitcoins [] which allows you to purchase things from Amazon (the guy is an Amazon Affiliate). The process is a little odd, but the guy running it is super helpful.

Re:roller coaster ride (1)

mestar (121800) | more than 3 years ago | (#36410934)

If everyone is hoarding bitcoins, there will be no volume on the exchanges. Right now, mtgox has about 100.000 bitcoins traded every day, which is about 1.5-2 million dollars.

I don't think hoarding will every became problem for bitcoin, unlike gold, bitcoin is easily transferable.

Re:roller coaster ride (3, Informative)

ka9dgx (72702) | more than 3 years ago | (#36410794)

Wow... my $1.59 equivalent of bitcoin just became $1.00 equivalent.... if I can ever spend it for something.

On the other hand my US Dollar (The real kind, coined in 1901) is worth $28.00 in Federal Reserve "Notes"

I'll keep stacking both kinds, as they each have their appeal to me.

Good advice... (0)

Anonymous Coward | more than 3 years ago | (#36410902)

...for someone who has invested in bitcoins to give, to try and keep value in his investment.

Not so much, for anyone to follow. The value of this cryptographic play-money belongs at zero, and sooner or later it will land there and stay there. There is neither inherent nor legally-enforced value to it, only the kind of artificial pretend-scarcity any number shuffler can impose on the numbers he's shuffling (and I say "pretend scarcity" because there is absolutely nothing to prevent other people from initiating similar schemes which have every reason to be exactly as legitimate as this one, at practically no cost; there might be a scarcity of bitcoins, but there is no scarcity of entire monetary systems like bitcoin).

These hiccups don't make it certain it'll collapse entirely and forever this week, although it does suggest the end is near. It's just as certain as it ever was, though, that sooner or later the reality that this stuff is less valuable than monopoly money will pop the ridiculous speculative bubble.

Re:Good advice... (1)

BrokenHalo (565198) | more than 3 years ago | (#36411176)

There is neither inherent nor legally-enforced value to it...

Well, for that matter, there is no inherent value to your greenback either, and any legally enforced value only holds good for the term of your government.

For this reason, Bitcoin made an interesting thought-experiment in what we are prepared to accept as a token for trade. The fact that it has succeeded (to whatever degree) in crossing into the physical world makes it all the more interesting.

I'm just waiting for Bitcoin to become useful for anything other than buying or selling illicit drugs, since I am now of an age where the consumption of (or trade in) such goods is no longer so enjoyable or part of my mindset.

I need drugs, weapons and hookers (0)

Anonymous Coward | more than 3 years ago | (#36410774)

Where do I sign up?

Re:I need drugs, weapons and hookers (1)

ColdWetDog (752185) | more than 3 years ago | (#36411042)

Where do I sign up?

Here. []

Just one exchange (2)

richie2000 (159732) | more than 3 years ago | (#36410776)

Even though MtGox is the largest BTC exchange, this dip in value seems to have affected only that one exchange. Tradehill for example was completely unaffected. Bitcoin is still a pretty small currency so these kind of events should be expected until more people buy into it to create stability. If nothing else, it may attract daytraders. :-)

Re:Just one exchange (1, Insightful)

phantomcircuit (938963) | more than 3 years ago | (#36410920)

The cause of this is actually extremely simple, dwolla withdrawals from mtgox were down on mtgox for a few days, so nobody had any reason to sell BTC.

As soon as it came back up the volume of asks exploded.

Bitcoin is imaginary (5, Insightful)

dadioflex (854298) | more than 3 years ago | (#36410786)

I keep waiting for someone to jump out and shout "April Fool!"

Yes, yes, all currency is imaginary. But there's imaginary and frigging deluded.

Re:Bitcoin is imaginary (0)

Anonymous Coward | more than 3 years ago | (#36410850)

I agree all currencies' value is imaginary, especially in an economy based on exchange rates between a particular currency and the actual goods and services. This American Life [] had one of the best explanations I've ever heard, even better than Econ 101.

Re:Bitcoin is imaginary (1)

hedwards (940851) | more than 3 years ago | (#36410870)

To varying degrees. US currency is legal tender for all debts public and private, well within the US, so as long as you have the bills to pay the debt they have to accept it no matter what the ultimate outcome might be, even if they would make more money requiring a different form of payment. But, you can still see massive inflation when the Fed decides that the rich aren't rich enough and starts printing money to give the rich interest free loans.

Re:Bitcoin is imaginary (1)

bill_mcgonigle (4333) | more than 3 years ago | (#36411276)

so as long as you have the bills to pay the debt they have to accept it

That's true, but the prices will rise to match actual value.

Re:Bitcoin is imaginary (1)

Kenja (541830) | more than 3 years ago | (#36410978)

US currency is backed by the treasury department of the united states of america. What is bitcoin backed by?

Re:Bitcoin is imaginary (0)

Anonymous Coward | more than 3 years ago | (#36411012)

I'm not sure you understand the meaning of "backed" with regards to currency. Just stamping your name on something doesn't imply backing.

Re:Bitcoin is imaginary (1)

Anonymous Coward | more than 3 years ago | (#36411040)

US currency is backed by the treasury department of the united states of america. What is bitcoin backed by?

Handwaving, wishful thinking, and the infinite arrogance of a bunch of shortsighted nerds desperately hoping that throwing enough chaos at a situation will reshuffle the deck (so to speak) to put them on top. See? That's THREE whole things it's backed by! That's WAY more stable and worthy than the US dollar!

Re:Bitcoin is imaginary (1)

the eric conspiracy (20178) | more than 3 years ago | (#36411100)

US currency is backed by the treasury department of the united states of america.

O RLY? It USED to be backed by the US Treasury but that ended when Nixon took us off the gold standard. Now its backed by the faith people place in the ability to exchange it for useful goods and services in the future.

Some people mistrust this and put their money into gold, land, stocks, other currencies etc. Of course this is really no different because they are evidencing faith in the idea that they will be able to exchange these things for useful goods and services in the future too.

Personally I think it's a good idea to diversify, and not have all your savings tied up in one type of asset. Shit happens as they say.

Re:Bitcoin is imaginary (5, Informative)

betterunixthanunix (980855) | more than 3 years ago | (#36411140)

The US dollar is backed by the need American citizens have to pay their taxes, since the Treasury only accepts dollars for tax purposes.

Re:Bitcoin is imaginary (1)

BrokenHalo (565198) | more than 3 years ago | (#36411242)

That's nice, but what does your treasury department have to back any "value" they ascribe to those boring bits of green paper that they print? It's not as if those notes have any defined worth in terms of (say) mangoes, bananas or lumps of gold which are of intrinsic value to someone who has the munchies or who makes shiny bits of jewellery.

Re:Bitcoin is imaginary (4, Informative)

betterunixthanunix (980855) | more than 3 years ago | (#36411202)

Yes, yes, all currency is imaginary.

Not true; currency is a tool used by governments to manage the exchange of goods produced by citizens for services provided by the government. We pay for government services with taxes paid in currency (issued by the government), and the government pays for private sector goods and services will currency. Currency has value because citizens are required to pay taxes; you cannot opt out of paying for government services (one might argue that by virtue of being a citizen, you are receiving those services [e.g. the government is defending you from foreign enemies], and not paying would amount to theft).

Before currency, of course, taxes were collected by government agents taking goods directly from the citizens -- say, 2 head of cattle, or perhaps some fraction of the grain produced by your fields, etc. Currency is much more convenient, since government agents do not have to judge whether or not a piece of gold or some paper money or a check is healthy and disease-free (they would have to do this with cattle, of course). Currency also allows the government to provide a much broader array of services, because it simplifies the system of paying the cost of those services -- salaries paid in currency are a lot easier to compute than salaries paid in physical goods.

I know, in high school we are all told that currency gets its value because everyone in society agrees to it, as if some magical process occurred. The agreement is simply an part of the broader agreement to be governed; there is no magic here, just politics and economics.

Don't feed the trolls (1)

rubypossum (693765) | more than 3 years ago | (#36411282)

Seriously, how can something like this be modded insightful? All modern currencies are made by a bunch of guys with a printing press. Somehow that magically blesses them into being "valuable". I don't see why a bunch of open source computer programmers can't create some currency too. Why is that deluded, but some faceless bureaucrat with a printer any less deluded? I would take a currency "backed" by cryptography over a currency "backed" by the FBI any day.

Not untraceable? (1)

countertrolling (1585477) | more than 3 years ago | (#36410826)

Then what's the point?

Re:Not untraceable? (1)

hedwards (940851) | more than 3 years ago | (#36410884)

It's great for money laundering.

Re:Not untraceable? (1)

Anonymous Coward | more than 3 years ago | (#36410904)

What's the point of other in-early-out-rich schemes?

Re:Not untraceable? (0)

Anonymous Coward | more than 3 years ago | (#36410932)

The article says that they're not untraceable if you access The Silk Road without using Tor -- except that you can't. Hurr durr.

I still don't understand (0)

Anonymous Coward | more than 3 years ago | (#36410836)

Why anyone would pay real money for this fake virtual money? It's just not logical.
You can give me your bullshit reasons all day long, nothing will make sense of it.

A more rigorous look at bitcoin's fundamental valu (0)

Anonymous Coward | more than 3 years ago | (#36410858)

Everyone knows that market demand for bitcoins sets their price. But there is a lot of debate over what creates that demand. Who is buying all those coins from miners?

Proof-of-work systems are a little counter intuitive. We will look at the similar asset gold to explain them. People dig gold out of the ground, sell it to others who put it in a vault in the ground and sit on it. Why bother? Proof-of-work guarantees scarcity. I know that nobody can magic more gold into existence. It's going to take X amount of time/labor/material/human ingenuity to get more gold. Therefore I know gold won't suddenly become common since those other resources are limited.

So you have this scarce resource. Is scarcity enough?

No. It must be scarce and in demand. People buy gold because they think they can sell it to someone else later for the same or more of other things they want. Gold is a way to transport value across time.

Why does the gold buyer assume there will be equal or higher demand in the future when the person they sell it to also just wants to sell it for the same or more than he paid? At the end won't someone HAVE to be left holding a bunch of useless rocks?

Not if the supply of gold increases more slowly than the class-of-people/number of dollars seeking to transport their value over time.

What prevents a sudden crash?

Nothing! The check on this is that people don't want to transport value over a week typically. They want to transport value over a span of years. The longer this investment window the more the supply of a good will be restricted. Restricted supply of existing gold (in addition to new mined gold, the buyer doesnt care) relative to the total amount of gold in existence helps ensure that there won't be a sudden drastic price decrease.

Now you can go back and replace the word gold with bitcoin. The creation of new bitcoins is similar to gold in that it is a small amount relative to those coins already in existence. But what about the other factor? What is the investment window of bitcoin? No one knows. Many proclaim it to be a bubble and will sell at the first sign of correction. Many hoarders claim they are in it for the long haul. Whom you believe will sway the market more is up to you.

The fundamental value of bitcoin is that people want to use it to transport value over time. The characteristics of bitcoin generally discussed such as a lack of inflation and decentralization merely make it more attractive as an asset to fulfill this role. If the number of people/dollars willing to hold bitcoin for this purpose grows faster than the rate of creation of new coins plus the rate at which current holders decide to sell theirs price will continue increasing.

Re:A more rigorous look at bitcoin's fundamental v (0)

Anonymous Coward | more than 3 years ago | (#36411134)

At the end won't someone HAVE to be left holding a bunch of useless rocks?

No, because gold can be used for other things. Jewelry, electronics, manufacturing, electronic shielding, etc. Gold has actual uses besides just a currency. You can't eat a bitcoin. You cant take a bitcoin, melt it down, and use it to make something else. That is why bitcoins will never take off. The only reason currencies have the value they do now is because, at one point, they could actually be turned in for gold. No one out there is foolish enough to trade gold for bitcoins.

Re:A more rigorous look at bitcoin's fundamental v (1)

h4rr4r (612664) | more than 3 years ago | (#36411228)

It does not matter that they could at one time be turned in for gold. What matters is that I can buy things I want or need with currency. Try actually doing that with gold. Go to your local gold-seller, get a real gold coin and try to buy groceries with it, or a computer or anything else. When that fails go back to the gold-seller, sell the coin to him and see how much value you just lost so you could get your currency back. It would literally be cheaper to buy foreign currency and exchange it when you need to pay for goods or services.

Gold is different. (0)

Anonymous Coward | more than 3 years ago | (#36411150)

If nobody wants to buy your gold, then you can still have things made of it. It still makes pretty jewelry, is still very easy to work, still alloys well for a variety of purposes, and is still corrosion resistant.

It's no accident that among all of the rare substances of the world, gold emerged as the most preferred monetary commodity. It is great stuff! If it were as common as iron, we'd use it for just about everything.

Its value is inflated somewhat by monetary uses and speculation, but its use-value means it would still have excellent value even if these collapsed.

Pick your poison. (2)

bahface (979106) | more than 3 years ago | (#36410862)

The US dollar has lost over 95 percent of its purchasing power since its inception. No one seems to notice. Pick your poison.

Re:Pick your poison. (1)

hedwards (940851) | more than 3 years ago | (#36411022)

It's because nobody is that old, the original ones being issued near the end of the 18th century. So, unless you're very long lived, the actual loss of purchasing power over that period isn't a big deal. Up until relatively recently wages would go up by a similar figure, and typically somewhat more than inflation as increases to productivity would take effect. The dollar itself is just a place holder, the only reason to care about inflation at all is if you're the type of person that's in the position to hold onto dollars.

The bigger problem lately has been the inflation created to cut no interest loans to corporations that are then subsidized to create jobs over seas via IRS loopholes. Inflation or deflation of a currency, what matters a lot more is whether the ecomony is growing, shrinking or remaining relatively static. You can create an inflationary or deflationary period trivially by printing or destroying currency in massive quantities.

Re:Pick your poison. (1)

Fnkmaster (89084) | more than 3 years ago | (#36411116)

Inflation at a modest rate (2-3%) is actually a good thing for the economy. It encourages present consumption, lending, or investment over currency hoarding. Noticeable changes in currency's purchasing power over a time scale of minutes, days, or weeks, however, is a bad thing because it causes major economic distortions and lots of wasted activity trying to avoid the negative consequences of these changes in value.

Silk Road (1)

msobkow (48369) | more than 3 years ago | (#36410892)

This "Silk Road" website seems to be the crux of the problem, but I can't even verify it's existence. No search engines turn up links for anything other than a Silk Road videogame, a forum, and a few other innocuous venues. As far as I can tell, the senators complaining about it must be smoking product from this mythological website.

Re:Silk Road (1)

Anonymous Coward | more than 3 years ago | (#36410944)

Go here:

And use your brain to get the rest of the way there

Re:Silk Road (1)

Anonymous Coward | more than 3 years ago | (#36410980)

It's here:
http://ianxz6zefk72ulzz.onion/ [ianxz6zefk72ulzz.onion]

You will need Tor.

Still an ad (5, Insightful)

Jiro (131519) | more than 3 years ago | (#36410898)

The gst of the article is "Bitcoin is important. It's just like real money. See, it even has a market like real money, but the problems of the market aren't too bad." Despite the Slashdot headlne mentioning the volatility, the article goes out of its way to say to say that the problems aren't all that bad and goes on to emphasize how much it is like real money. It then goes for four sections (out of five total) explaining exactly what Bitcoin is, why people might want to have it, how it's being attacked for no fault of its own, and how some people don't like it but it's just paranoia.

It's a disguised ad It's like having an article whose headline says that a popular diet doesn't always work, then reading the text and finding that the reason it doesn't work is because it's too natural and some people refuse to obey the diet because they don't like natural things. Then followed by paragraphs of details about the diet, where to buy a book about it, and complaining about how the media doesn't like the diet.

Re:Still an ad (1)

NeutronCowboy (896098) | more than 3 years ago | (#36411170)

You mean an article explains what some esoteric new thing is that not everyone might have heard of? It even puts the explanation after the description of the covered event, so that seasoned readers can skip that part without missing anything? You mean, it's like a real article written by a real journalist?

I mean, yes, there's always a risk of astroturfing. But at least understand what you complain about. The alternative is articles that never mention what that new thingamajigg is they are talking about... oh, like most Slashdot articles. I suggest you go out more.

Re:Still an ad (1)

Jiro (131519) | more than 3 years ago | (#36411302)

Actually writing an article about Bitcoin problems would require maybe 4 lines describing what Bitcoin is, and *no* lines referring to "misconceptions" that people have about how bad Bitcoin is, nothing referring to "unfunded paranoia", and no market-speak.

It's stil young (1)

Qatz (1209584) | more than 3 years ago | (#36410900)

Bitcoin is still a young "currency" and there are relatively few buyers and sellers. This level of volatility is to be expected. Chances are good it will stabilize, and climb back up in value. Then this will happen all over again. Eventually that will stop happening but it's going to be awhile.

Re:It's stil young (1)

betterunixthanunix (980855) | more than 3 years ago | (#36411124)

I imagine that around April, the value of bitcoin will plummet, as a bunch of American bitcoin holders try to dump their bitcoins for dollars in order to pay their taxes. How exactly will bitcoin regain that value, other than speculation (which is not going to last much longer)?

Not a currency yet (3, Insightful)

Phoenix Dreamscape (205064) | more than 3 years ago | (#36410908)

These swings are fairly meaningless since Bitcoin hasn't achieved its goal of becoming a currency yet.

The markets have turned it into a volatile foreign exchange game, and people are just trying to make a quick buck playing the market. There currently isn't any 'currency' aspect to it, since there's damn near nothing you can buy with bitcoins.

Since they failed to achieve any intrinsic value of their own, they are currently just bad, unreliable representations of legal tender. As long as that is true, nobody will ever accept them as payment for real goods or services.

Re:Not a currency yet (1)

hedwards (940851) | more than 3 years ago | (#36411060)

Which it won't. The main purposes of Bitcoins at the moment are scamming and money laundering. I'd be surprised if there weren't already a few governments investigating the legality of the whole thing as I type. Especially given the utility it has in buying illegal goods and or services.

you can buy modchips with them here: (0)

Anonymous Coward | more than 3 years ago | (#36411214)

Re:Not a currency yet (0)

Anonymous Coward | more than 3 years ago | (#36411218)

As the currency develops: this will change. Sometime in the next few weeks there'll be at least one retailer selling physical goods for BTC, and I expect more will follow. There's an ever growing list of people who accept them:

Take it of leave it: some people will buy coins now that the rates have dipped and will enjoy the purchasing power of them once the price rises again, or people will buy coins and find out they lost a huge portion of their purchasing power.

One way or the other, it's a market that's growing!

Is Geeknet desperate for money that much? (1)

Anonymous Coward | more than 3 years ago | (#36410940)

One would think so, since they seem to shamelessly advertise such scam/pyramid scheme every week or so here.

Re:Is Geeknet desperate for money that much? (0)

Anonymous Coward | more than 3 years ago | (#36411298)

I'm failing to see the pyramid scheme? [] it would be one thing if the whole system was developed by an employee at ATI, as a scheme to sell more graphics cards I guess? but there's no body who's telling anyone "give me your money, go get money from other people, and tell them to do the same!".

Being a deflationary currency model, prevents people from looking at it like a pyramid. there will only EVER be a set amount of currency in the economy: so as demand for BTC increases: the supply goes down and drives the prices up.

I've been a bitcoin miner for a few months, earning a healthy 2 BTC/day. living in a country with cheap power (Canada, $0.08/kWh), generating coins is cheap and easy: if people stop trying to compare them to OTHER markets for long enough to find that there are more then sufficient merchants that have an interest in BTC, you'll find that the purchasing power is likely high enough to at LEAST break-even.

Sure, 2BTC runs nearly $200/month @ $0.08/kWh, but at the current purchasing power I can bring in enough goods/services to pay my bills.

When... (0)

Anonymous Coward | more than 3 years ago | (#36410960)

When are these idiots gonna get it!? bitcoins are a SCAM!! NOTHING MORE!!!

government manipulation (0)

Anonymous Coward | more than 3 years ago | (#36411020)

The problem with bitcoin is governments may not be able to stop it or bad it but they can manipulate the price by making huge purchases or sales. I think it's in response to Lulzsec asking for bitcoin donations. If it wasn't on the US government's radar before it is now!

see (0)

Anonymous Coward | more than 3 years ago | (#36411086)

the drop to $13 was a 1000btc sale from one person
it shot back up to almost 19 about 10 minutes later
it will be back up this week
and the author of that black friday article does not know what the meaning of inflation is
what a moron

Nefarious Activities? (3, Funny)

PPH (736903) | more than 3 years ago | (#36411094)

The best currency is still Legislative votes. Untraceable and the people in charge of the tracing have a vested interest in keeping it that way.

Perhaps... (1)

wpiman (739077) | more than 3 years ago | (#36411212)

Perhaps the value of the Bitcoins stayed the same just the US dollar swung wildly around it.

Bitcoin is not worthwhile as a currency (2)

Fnkmaster (89084) | more than 3 years ago | (#36411238)

I discussed this in my post from May 19th: []

Still applies. That chart isn't the chart of a proper currency pair (USD/Bitcoin), it's the chart of the price of a speculative asset in a bubble.

The people who set up Bitcoin had some good ideas, but they didn't think things through properly and they need to start over. The way they set up the allocation of a fixed amount of bitcoin per day was bound to create huge value distortions as more people started trying to create bitcoins and entered the market for buying and selling bitcoins.

The value of a bitcoin is therefore actually not a direct function of calculation work performed, but rather a function of the number of users/number of total computing cycles used to compute bitcoins (because the number of bitcoins issued per day is nearly constant as workload to find them increases - it's not actually constant, but rather a gradually decreasing series over time, but the amount of computing power dedicated to it has grown much faster than this function).

This is completely nonsensical. It is making the asset more and more scarce and driving up prices, but also making it less and less likely that anybody real would ever want to accept the asset as a currency replacement.

Good computer science, bad economics. Bitcoin has already failed because of this. Nobody looking at these charts would ever want to accept this stuff as currency.

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