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Time for the monthly cryptocurrency panic thread. While I fully agree that most cryptocurrencies are grossly overvalued, these articles always pretend a 20% sel

• JumpCrisscross 9y ago
  > these articles always pretend a 20% selloff is the beginning of the end There are individuals in this thread claiming "there will always be buyers" and that the probability of Bitcoin becoming worthless is zero. The point of the article isn't that Bitcoin is doomed. It's that there is a substantial non-zero probability it ends up worthless. That such an elementary claim about a volatile asset is controversial almost says more than the article.
  • adamnemecek 9y ago
    Ok can you talk more about your failure case then? What are the conditions like what exactly is the end result. There are 0 exchanges?
    • JumpCrisscross 9y ago
      > Can you talk more about your failure case then? The classic one. Nobody wants to pay more than a token amount for Bitcoin. Maybe central banks jacked up rates or we went into a recession or something newer and shinier came about. Value crashes, miners find it more valuable to sell their equipment than keep mining or confirming transactions, the entire ecosystem compresses to where it was when it was more about tinkering. Maybe it remains somewhat relevant, as a curiosity. Our generation's Esperanto. It takes no more imagination to imagine $0.0000000001 than it does to imagine $50,000.
      • adamnemecek 9y ago
        Are we talking about Bitcoin or all crypto?
        • JumpCrisscross 9y ago
          > Are we talking about Bitcoin or all crypto? Either. Spinning up a cryptocurrency may become as mundane as creating up a database, as silly (or illegal) as trying to market a Ponzi-based hedge fund, or simply a pedagogical tool for CS students. There is nothing inherent to crypto that says it must hold value. Markets are moody.
          • chocolatebunny 9y ago
            There's nothing inherent to anything that says that anything must hold value.
            • JumpCrisscross 9y ago
              > There's nothing inherent to anything that says that anything must hold value Yet you will find claims, on this thread, that Bitcoin becoming worthless is not possible.
              • adamnemecek 9y ago
                I'm not saying it's not possible, like that the possibility is zero, all I'm saying is that it's not that much more likely that the same happening with other things. And like Bitcoin is actually resistant to some of the factors that could make other things go to zero. All I'm saying, there's a little too much "BTC will be zero, I was it in a Hollywood movie" and not enough of "BTC will go to zero if the following scenarios happened. It will go to the moon if these happened". I wont see these since these don't go with the preconceived notions and one might actually have to understand "economics of online", international relations, cryptography, networking and like so much other shit. The people who I think are qualified to write about crypto is maybe Satoshi Nakamoto but even he didn't quite nail all of it.
            • 9y ago
    • Joeri 9y ago
      A bug is discovered allowing fraudulent creation of bitcoins, and no easy or timely fix is possible. That or governments outlaw it entirely.
      • adamnemecek 9y ago
        You are fundamentally arguing that cryptocurrencies, all of them, will be gone? That like 30 years from now, there will be 0 things that are basically cryptocurrencies or something that replaced them?
        • Retric 9y ago
          That's irrelevant. If every cryptocurrency around in 30 years has yet to be created then every current cryptocurrency would be dead. Consider, what happens if the Internet dies? Well you could run a private coin on an old laptop, but that's not really meaningful.
          • 20after4 9y ago
            Now that's a scary thought.
          • adamnemecek 9y ago
            It's not an overnight thing. Like the transfer from Bitcoin to the new thing would be very gradual, standard technology adoption rate curve. And like, it's not clear by how much would you really diminish Bitcoin. Like crpyto became a thing but I dont think it was at the stock market.
        • teraflop 9y ago
          It's a possibility. Maybe they'll still be here, maybe they'll be totally gone; maybe they'll exist, but only in certain niches, or in a form that's unrecognizably different than what they look like now. By analogy: two decades ago, US consumers were buying almost a billion dollars' worth of photographic film a year [1]. Photography hasn't gone anywhere -- people are taking orders of magnitude more photos than they used to -- but if you had invested your entire net worth into Kodak in 2000, you'd be penniless now. [1]: http://blog.keh.com/the-evolution-of-photo-lab-life/ http://blog.keh.com/the-evolution-of-photo-lab-life/
    • JackFr 9y ago
      No, there are 0 buyers. Doesn't matter how many exchanges.
      • tankenmate 9y ago
        Indeed there will always be exchanges if there is demand.
        • deleted 9y ago
          [deleted]
    • Robotbeat 9y ago
      Someone announces they have had a large quantum computer for a while and have cracked every public key on the blockchain. That'd probably do it. Quantum Jubilee, y'all. The year of decryption, all private keys revealed, all captive coins set free. It's just a matter of engineering at this point. Give it roughly 10 years.
      • nimchimpsky 9y ago
        Which is why I bought some QRL recently.
      • adamnemecek 9y ago
        You are right however that event is similar to idk deadly asteroid approaching earth. Sure, it might make btc go to zero but so will like so much other shit. Also quantum resistant crypto is possible.
      • ejanus 9y ago
        Not only cryptography coins,even traditional banking,e-commerce,and our modern society would go down. Quantum for all.
        • bringtheaction 9y ago
          Exactly and in fact some crypto currencies claim to be working on making quantum computing resistant crypto currency. So if someone made a claim like envisioned by GP and could prove it, certain crypto currencies might do just the opposite of going to zero.
        • Robotbeat 9y ago
          Yup. Quantum Jubilee is coming. But interestingly, even just the credible threat of Quantum Jubilee could have devastating effects on Bitcoin classic. Banks might be better prepared to switch over to quantum-resistant encryption since they're already centralized.
          • ric2b 9y ago
    • virgilp 9y ago
      Let me tell you a story. My parents, before I was born, worked as teachers in Africa. They were sent via an agreement of our (communist) state with the Belgian government and were paid "expat" money. Only problem is, they knew that when they came back the government would take all their money (coerce them to exchange it at shit exchange rate, for a currency that was basically worthless). So they invested - they bought stuff. What did they buy? Well, they figured that ivory can only increase in value. So they bought ivory carvings - african art. We're sitting on a bunch of it - except for the artistic/decorative value... the monetary value is zero. Nobody touches ivory. Unless I'm willing to deal with some very shady persons and risk jailtime - I can't turn it to cash. You think it's unlikely that governments worldwide would ban any given crypto - including BTC? Just watch what happened recently in a few countries....
      • adamnemecek 9y ago
        Let me preface this story by saying that your parents did a shit thing and I'm glad they were duly punished. Fuck ivory. But I'm getting distracted. Bitcoin is unlike your situation as with ivory you have to have physical contact with the shady person. With BTC you don't. People online don't care as much about dealing with shady people. It's also kinda hard to tell who's a shady person online.
        • softawre 9y ago
          Bitcoin is so divisive you've managed to shit on his parents to win an argument. An argument that you then concede, saying that it doesn't matter whether BTC is legal or not because you can always sell it online. If it's illegal, doesn't it's value go way down? If you literally risk jailtime to sell it (or more accurate, to convert it to fiat eventually)
          • adamnemecek 9y ago
            > Bitcoin is so divisive you've managed to shit on his parents to win an argument. Not really, I dislike the fact that he volunteers this information. Replace ivory with child pornography (ethically they aren't that different). Would you still defend op's parents? Also note, it was a side note, I didn't say it to win an argument. > If it's illegal, doesn't it's value go way down? If you literally risk jailtime to sell it (or more accurate, to convert it to fiat eventually) So like all governments at once will outlaw doing anything with crypto? Like not regulate it, even if heavily, they'll just basically make owning crypto as illegal as owning idk, child porn (pardon for the repeat analogy). Like you aren't realizing the impossibility of making something like crypto illegal.
    • bradleybuda 9y ago
      This way: https://www.ebay.com/itm/3-Zimbabwe-banknotes-1-x-10-20-50-Billion-dollars-2008-series-currency/263439407032?hash=item3d563657b8:g:J0cAAOSwiIxZ-HMG https://www.ebay.com/itm/3-Zimbabwe-banknotes-1-x-10-20-50-B...
      • adamnemecek 9y ago
        Its good that you are bringing this up. Bitcoin is entirely resistant to this, which can be demonstrated by the fact that Bitcoin is supposed to be popular in Zimbabwe.
      • bunderbunder 9y ago
        That particular way seems extremely unlikely, at least in the case of Bitcoin. It was specifically designed so that it should be impossible to dilute the currency like that. Nobody is supposed to be able to directly control the supply of BTC, and the rate at which new BTC is created is steadily decreasing toward zero. So going to zero in that particular way would presume that there's a vulnerability in the protocol that makes it possible to manufacture effectively unlimited bitcoin outside the normal channels, and that nobody is able to figure out a way to defend against it.
    • martin1975 9y ago
      1) Bitcoin becomes too expensive to mine or even sustain due to energy prices 2) Bitcoin's blockchain grows to petabytes or exabytes in size thus becoming horrendously slow to both replicate or even host 3) Bitcoin is surpassed by a better technology, such as Cardano or IOTA. This won't kill it but it will stunt/cap its growth indefinitely. 4) Bitcoin fails to integrate into the legacy world fully by remaining pseudonymous, reluctant or refusing to comply with AML/KYC regulations everywhere in the world, developed or not. It then maxes out in growth. Again, not a failure case, as whatever value was there will probably still remain, but it will be dwindled down significantly. I'm sure there's more but I can't think of all of them...
      • deleted 9y ago
        [deleted]
      • adamnemecek 9y ago
        We actually kinda agree. I'm fundamentally saying that crypto wont go away.
        • martin1975 9y ago
          No legacy ever really goes away. However it slips into irrelevance unless it's built on sound foundations that can be evolved. Sad to say, no PoW currency has a sound foundation that can be expanded and evolved... like tcp/ip has been able to evolve over the last 40-50 years.
    • tbabb 9y ago
      It absolutely boggles my mind that so many people in this thread cannot conceive of a run on crypto. I assume they probably don't even know what a "run" is. And it boggles my mind that their only conception of failure is some kind of catastrophe or monumental event, like nuclear war, or quantum computing breaking cryptography. LITERALLY ALL THAT NEEDS TO HAPPEN IS THAT PEOPLE SUDDENLY WANT IT LESS. Excuse my caps. If people doubt the future of crypto, then the price goes down. If the price goes down, crypto looks less attractive, so the price goes down more. This can spiral arbitrarily close to zero. No nuclear war or quantum computers needed. What is being traded is like MMORPG game money or game items. They're only valuable as long as people want them. Crypto makes them unfakeable, but that doesn't mean people will want them. My jaw is on the floor that this is beyond so many peoples' imagination.
      • MichaelGG 9y ago
        Not to zero. I'd personally pay $1, probably more, for even 10% of all Bitcoins, just for the novelty. If there were no miners, maybe not much more than that, and I'd want the current private keys. I'm guessing there's at least someone that'd pay a few million for all of Bitcoin, so maybe a $0.10-1.0 floor, easily? Would be illiquid and hard for small holders to sell though. Also, quantum computers do not break Bitcoin entirely as in previously unused addresses are safe. You'd need a way to quickly generate keys matching a certain hash. Otherwise you need a ton of hashing power, too, to rewrite the part of the chain created in the time a spend-of-interest was created and you generated matching keys with your attacking machine. Seems like something that can be upgraded assuming a QC-resistant crypto scheme exists.
        • ScottBurson 9y ago
          Sure, it won't go to literally zero (unlike stocks; companies can go bankrupt). But the difference between falling three orders of magnitude vs. six, say, is not a very big difference to anyone who bought in at current prices.
        • akvadrako 9y ago
          But if it did go to $1, mining would become unprofitable until the next adjustment. So the only way forward is the network to fork. Then you wouldn't own "the Bitcoins", just "a Bitcoins".
  • onewaystreet 9y ago
    > That such an elementary claim about a volatile asset is controversial almost says more than the article. That it's such an elementary claim is the reason for the pushback. What's the point in saying something obvious?
    • JumpCrisscross 9y ago
      > What's the point in saying something obvious? Saying something obvious (e.g. circles are round) isn't the same as refuting something obvious (e.g. circles are squares).
    • hateduser2 9y ago
      Because people unfailingly pushback against it. The pushers should start their push acknowledging that it is possible if it’s really such an elementary claim to them.
• VMG 9y ago
  we haven't even reached the phase were https://99bitcoins.com/bitcoinobituaries/ https://99bitcoins.com/bitcoinobituaries/ gets new hourly entries
• hbosch 9y ago
  The trend of 15-20% swings is well documented in Bitcoin history, no doubts about that. Crypto is a young economy in general, and it's been thrilling for me (on the outside, as I don't speculate or hold) to watch. But I don't know. If you play with the zoom levels on price tracking sites, the $20k peak onward has been a pretty steady downward trend. BTC is down 20% over three days, down nearly 23% over a week. Is that par even for Bitcoin flash-crashes lately? Zoom out further to a month and the price is now down almost 40% at the time of this post. We zoom out to six months, or a year, or two years, and we see astounding gains then – we are all aware of the blistering rise in price over 2017. But once it dipped after 20k, there were a lot of people who swore it would climb back. And then it dipped further, and further, and the collective memory of Bitcoin's humble recent history was lost in the cacophony of media blitzes and new customers entering the market. I think the underlying worry for most people isn't the fact that the price goes up and down a lot... I think the worry really is that when growth stops will people still be interested? Can Bitcoin last forever if the price is e.g. <$5000/BTC?
  • starlust2 9y ago
    This is what happens when mania dies down. Everyone who "invested" at >10K are not seeing the enormous returns. Those people are more likely to have never heard of bitcoin before this year. They didn't put in money because of a financial revolution. They put money in to make an easy buck. Those people also represent a significantly larger chunk of the market capitalization. When they lose money they won't come back.
    • oreo81 9y ago
      >When they lose money they won't come back. Exactly! This is why casinos never make money.
  • saas_co_de 9y ago
    The interesting thing is that this is what a real free market looks like. This is what any market would look like without being rigged by governments and government backed institutions. Bitcoin may be the best proof yet of how deeply flawed the libertarian free market ideology really is.
• api 9y ago
  People who see and call out bubbles are always wrong N-1 times where N is the number of times a prediction is made. Look at the fundamentals. What we have here is a bad currency (volatile and deflationary) whose utility is diminishing as its price increases. There aren't a lot of value investors in cryptocurrency at this point. The vast majority of the people who hold it are holding it on the theory that it will continue to appreciate, but it can only do that if more money comes in. If these "HODL"ers start to believe that no more money will come in they will sell to lock in their gains. Once it starts this will easily become a self-reinforcing panic sell-off a.k.a. a bank run. Let's say it goes higher. Let's say it goes up another 1000%. That doesn't change these fundamentals. If anything it makes the situation even more volatile. Most people look at price charts in linear not logarithmic mode, making moves look larger at higher prices. This makes panic selling more likely.
  • specialist 9y ago
    If I'm reading you right... I agree that bitcoin et al are escrows vs currencies. That their current valuation is a combination of money laundering and typical bubble hype (FOMO, castles in the sky, gambling).
  • stanleydrew 9y ago
    > Most people look at price charts in linear not logarithmic mode Do you have any tools you recommend that make it easy to see these logarithmic charts?
    • byproxy 9y ago
      Coinmarketcap has a log scale button underneath their charts : https://coinmarketcap.com/currencies/bitcoin/#charts https://coinmarketcap.com/currencies/bitcoin/#charts
    • hndamien 9y ago
      Tradingview
• saas_co_de 9y ago
  The way I understand it bitcoin is guaranteed to go to zero by design because there is a fixed limit on issue and so eventually there will be no incentive to mine and the network will collapse.
  • roywiggins 9y ago
    The plan is that transaction fees will incentivize mining after all the bitcoins have been minted.
  • flush 9y ago
    You understand wrong. And are naive to think that such a simplistic flaw would not be considered by the substantial number of intelligent programmers involved in the Bitcoin project. The transaction fees on the network are incentives for miners to pass transactions in addition to block rewards.
    • wonnage 9y ago
      Appeal to authority is one of the most naive arguments out there... especially when it's to some programmers attempting to design an economy
      • flush 9y ago
        Appeal to authority is a logical fallacy--you cannot use appeal to authority to create a rigorous argument. I agree with that. But you can gain some idea of probability that something is correct or incorrect. For example, if 99 of 100 doctors agree that vaccines do not cause autism, that does not necessarily mean that vaccines do not cause autism. But chances are really good that the 99% of doctors are correct. Nice job giving the formal name of a logical fallacy, though. Adds a lot of credibility to your argument!
        • mining 9y ago
          Saying 99/100 doctors think something medical is true isn't an appeal to authority... Doctors /are/ an authority on medical matters. Programmers aren't an authority on economic matters.
• JackFr 9y ago
  "Panic", "liquidity crisis", "run" -- when the end comes, it's always much, much faster than players in the market had imagined until that point. What will happen is that animal spirits will change, and liquidity will slowly recede. At some point many market players will say, "Yes crypto has value, but I prefer to hold more dollars for the time being." Price levels drop and volatility increases, and the feeling compounds. More people prefer to hold more of their wealth in dollars. Those who have bought with leverage are force to sell, driving the price further down. At that point there is a full on panic and crypto exchanges which are unregulated at best and sketchy at worst, and under no legal obligation to clear trades, will first front run their customers and then fail. Stocks and bonds at this point would hit a floor at the value of the liquidation dividend, often, but not always, zero for the stock, slightly higher for bonds. Currencies have no floor, but typically have capital restrictions (you can't get out) or a central bank with reserves and an interest rate mechanism The central bank would buy with reserves or raise interest rates to support it. Cryptos have no central bank and no capital restrictions.
  • InclinedPlane 9y ago
    Yup, as volatility increases and prices fall more and more exchanges are going to halt transactions or just go offline because it's not worth it for them. It's going to get harder and harder to get dollars for bitcoins. And the transaction backlog is going to make people lose their minds. People will decide they want to get out and they'll try to sell, but that's just the start of a process Meanwhile, processing fees are going up and up and up because people who want to lock in their returns are going to pay a premium to get out as early as they can. And, of course, because the cash-dollar value of those processing fees will be in freefall and miners are going to "prefer to hold more of their wealth in dollars" as well. That's going to devolve into a really ugly feedback loop. People are going to be increasingly incentivized to get out early to avoid an even worse rush with higher fees later, and they are going to pay high fees for the same reason. It's going to be a mess.
• InclinedPlane 9y ago
  Ah yes, "it's different this time". Sure, sure. The reality is that the nanosecond the zeitgeist changes and people start believing that there is going to be an extended period of decreased value in cryptocurrencies then there will be a massive selloff which will just cascade. This is how markets work, this is how speculative bubbles work. Bitcoin especially has almost no value other than speculative investment, it's just a matter of time until the bubble pops.
  • nrhk 9y ago
    Which is fine, there's plenty of people who believe in it enough to buy at lower price points and think the current level is a bubble. What about $100 billion for the entire market, all the miners, all the companies, venture capitalist, developers etc... Who says Bitcoin even needs to be worth anything, the faster that stuff dies the faster the rest of the crypto world can move on without it. The market as a whole won't tank completely unless its revealed that blockchain or DAG tech can't ever scale and decentralized tech is just too slow and inconvenient to use for everyday purposes. At some point during said panic sale-off people will think, hey have the fundamentals changed or is this just a panic sell-off? Then they won't sell or will sell with the intent of buying in lower.
    • InclinedPlane 9y ago
      So you're saying it's "different this time"? Curious, none of the things you mention indicate how this speculative bubble is any different from houses, stocks, or tulips.
      • akvadrako 9y ago
        He mentioned it - it's different because Bitcoin has "believers". If a few billionaires and millions of others want it no matter what, it'll retain value. People were investing in houses, stocks and tulips to make money. Many people invest in Bitcoin for religious reasons.
• danhak 9y ago
  > While I fully agree that most cryptocurrencies are grossly overvalued... Could you please explain what “overvalued” even means in this context, and how one might go about determining fair value for cryptocurrency? I’ve yet to receive a straight answer on this.
  • raiyu 9y ago
    Think of it this way. Let's say that to get 1 Bitcoin I could just install an app on my computer, and within 1 second get a Bitcoin. Then everyone in the world can make as many bitcoins as they want, there are no limits on the number of bitcoins, and the process to get more doesn't increase in difficulty. So now we have bascially infinite bitcoins so the value of them is zero, because why would I buy one, when I can just make one at any time. The opposite of this is where Bitcoin derived it's value. First there is a fixed number of Bitcoin, so you can't simply make more past a point. Secondly, the effort required to mine Bitcoin increases over time. This effort requires real world currency exchange. I need to buy a powerful computer and then pay a lot of electricity, cooling, space. So effectively my mining operation costs $x. Now as time goes on to get the same number of Bitcoins I need to increase my spend because the computational needs increase as well. Effectively, I'm exchanging my USD to equipment and energy, which are giving me Bitcoins. A reasonable value for Bitcoin would be to calculate the total amount of hardware and energy invested in mining and there you have a decent floor value. You can then extrapolate this for the future, since the total amount of Bitcoin to be created is known, you could say that multiplying that out you get a total amount of value. To say that they are overvalued would mean that the total current dollars invested in mining bitcoin is far less than the current total market cap of said coins. If you look at the price of Bitcoin 2014 to the start of 2017, you see a gradual increase in price, which would be explained by the amount of money going into mining and with some markup. In 2017 you see a 20x increase, but that isn't matched with a 20x increase in spend for minting Bitcoins, so the increase is irrational.
    • walrus1066 9y ago
      I don't think the value of an asset is derived purely from scarcity, or the effort required to make it. What if the asset itself has no use? If I spend 1000 hours making a really bad doesn't, it'll have a value of zero, even though it's unique and a lot of work was put into it. I haven't created value, I've destroyed it, I.e. All that time and nothing to show for it.