7 ms·

Bitcoin implodes: 90% down from June Peak

27 points by wicknicks 15y ago

chrismealy 15y ago
It's not money unless you can pay taxes with it.
- bdfh42 15y ago
  A good rule of thumb - but I would be happy to call it money if I can buy a drink with it.
  - ordinary 15y ago
    "Money as in beer"?
- white_devil 15y ago
  The problem is that governments define what they accept for tax payments, but the value of that (fiat currency) is being eroded by governments themselves. Whatever other people would accept as payment for their services and products might well be Bitcoin, and there's nothing wrong with that.
  - bunderbunder 15y ago
    There's a popular metaphor in economics, of a rising tide that lifts all boats. Expansion of the money supply is a force that both causes and allows the tide to rise. If it's expanding fast enough to cause a reasonable level of inflation, then it causes the tide to rise by encouraging economic productivity: If money only loses value by being stuffed under a mattress, then there's an incentive to use it by investing or spending it instead. This spurs job growth, velocity, and generally increases the GDP and ultimately helps everyone to become more wealthy. Even without that, though, the money supply needs to expand apace of economic expansion, otherwise you end up with deflation: If an increasing number of people are competing for a static quantity of currency, so the value of the currency keeps going up due to simple supply and demand. That creates a strong disincentive to participate in the economy. Why would you spend any more money than you absolutely have to in the present, if you know that the money will keep becoming more valuable for as long as you're willing to patiently wait? BTC, by eschewing a central authority with the power to (hopefully intelligently) control the money supply in response to economic realities, and choosing to use an fixed, artificially-selected growth curve instead, has almost certainly doomed itself. It can only work if the expansion of the BTC economy closely mirrors the expansion of the BTC money supply. If its popularity rises faster than the money supply grows, the result is economic gridlock due to deflation. And on the other side of things, if BTC adoption now falls very far behind that set curve, then it's going to run into an inflationary meltdown not entirely unlike the sort that many of its fans naively believe can only be caused by a government. TL;DR: Just because a bad driver might cause a wreck does not imply that cars would be better without steering wheels.
    - white_devil 15y ago
      There's way too much theorizing/waxing-poetic online about how economics supposedly works that may or may not have a basis in reality and/or actual understanding of economics. I'm not really qualified to "call nonsense" on things, but I don't think you're in a position to just lay down the law either. Anyway, if there's a fixed supply of Bitcoins, then yes, it seems that one unit's value would keep increasing. But wouldn't it then be possible to use increasingly small fractions of a Bitcoin as necessary?
- deleted 15y ago
  [deleted]
- TDL 15y ago
  This is a profoundly inaccurate definition of money. https://secure.wikimedia.org/wikipedia/en/wiki/Money https://secure.wikimedia.org/wikipedia/en/wiki/Money Regards, TDL
  - chrismealy 15y ago
    Nope, you're wrong: http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867 http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867
bdfh42 15y ago
You can create a currency with the backing of something of value - even the promissory notes of solid citizens - but you cant create a currency from nothing - it has no value. While not intending (I am sure) to be a pyramid scheme (artificial value from short term demand) this is how it will/has inevitably turned out. The concepts underpinning Bitcoin however have a future - as long as the mining is done where wealth is accumulated and not on a GPU.
- raganwald 15y ago
  I like your comment, however you described Bitcoins as “A pyramid scheme (artificial value from short term demand)." I think the term “speculative bubble” better describes value being primarily driven by short-term demand. A pyramid scheme is described as: A non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. Now, if you needed to pay $100 to become a Bitcoin miner and you received $50 from every other person you recruit to mine Bitcoins, this would be a pyramid scheme.
  - mruser 15y ago
    Indeed. I, for one, profited quite well for a few months as one of the many driving speculative conversion rates. I also predicted the short-term effect of the speculation and exited early. I do not see Bitcoin recovering any time soon.
    - bdfh42 15y ago
      QED
- TomOfTTB 15y ago
  Most of the world's currencies don't have backing these days. Even when they do have some kind of commodity backing them the governments don't tell people how much backing is there (The U.S. Government for example won't tell people how much gold they have in reserve). Backing isn't relevant if you don't know how much of it there is. All a currency really needs to be valuable are two people who have faith in it and who have resources they want to trade with each other. Also for the record the only reason backing is important at all is because backing means there's a finite amount of currency that can be created. Bitcoin has, in theory, an equally valid limiting factor
jonpaul 15y ago
The biggest problem that I have with Bitcoin is that there's a bit of an impedance of trading dollars for BTC and vice versa. When you could use Dwolla, that helped, but now that Dwolla pulled out (at least that's my understanding), it's even more difficult to get BTC. What would be ideal, is to be able to use your credit card to buy BTC. But that won't happen because credit cards need the ability to support charge backs and that makes it difficult with BTC's anonymous nature. Once this problem is solved, I think you'll find a lot more people becoming involved with BTC again.
- runn1ng 15y ago
  Dwolla pulled out? When exactly?
- NinetyNine 15y ago
  People on Silk Road offer automatic BTC transfers from various payment companies.
saturn7 15y ago
In the UK Bitcoins are classified as a commodity. It falls under the same rules as buy and selling gold which basically has no formal regulation. I heard somebody define "money" as the most liquid commodity. The commodity that can be exchanged for goods and services the most easily and efficiently is money.
deleted 15y ago
[deleted]

27 points by wicknicks 15y ago

chrismealy 15y ago

It's not money unless you can pay taxes with it.

bdfh42 15y ago
A good rule of thumb - but I would be happy to call it money if I can buy a drink with it.
- ordinary 15y ago
  "Money as in beer"?
white_devil 15y ago
The problem is that governments define what they accept for tax payments, but the value of that (fiat currency) is being eroded by governments themselves. Whatever other people would accept as payment for their services and products might well be Bitcoin, and there's nothing wrong with that.
- bunderbunder 15y ago
  There's a popular metaphor in economics, of a rising tide that lifts all boats. Expansion of the money supply is a force that both causes and allows the tide to rise. If it's expanding fast enough to cause a reasonable level of inflation, then it causes the tide to rise by encouraging economic productivity: If money only loses value by being stuffed under a mattress, then there's an incentive to use it by investing or spending it instead. This spurs job growth, velocity, and generally increases the GDP and ultimately helps everyone to become more wealthy. Even without that, though, the money supply needs to expand apace of economic expansion, otherwise you end up with deflation: If an increasing number of people are competing for a static quantity of currency, so the value of the currency keeps going up due to simple supply and demand. That creates a strong disincentive to participate in the economy. Why would you spend any more money than you absolutely have to in the present, if you know that the money will keep becoming more valuable for as long as you're willing to patiently wait? BTC, by eschewing a central authority with the power to (hopefully intelligently) control the money supply in response to economic realities, and choosing to use an fixed, artificially-selected growth curve instead, has almost certainly doomed itself. It can only work if the expansion of the BTC economy closely mirrors the expansion of the BTC money supply. If its popularity rises faster than the money supply grows, the result is economic gridlock due to deflation. And on the other side of things, if BTC adoption now falls very far behind that set curve, then it's going to run into an inflationary meltdown not entirely unlike the sort that many of its fans naively believe can only be caused by a government. TL;DR: Just because a bad driver might cause a wreck does not imply that cars would be better without steering wheels.
  - white_devil 15y ago
    There's way too much theorizing/waxing-poetic online about how economics supposedly works that may or may not have a basis in reality and/or actual understanding of economics. I'm not really qualified to "call nonsense" on things, but I don't think you're in a position to just lay down the law either. Anyway, if there's a fixed supply of Bitcoins, then yes, it seems that one unit's value would keep increasing. But wouldn't it then be possible to use increasingly small fractions of a Bitcoin as necessary?
deleted 15y ago
[deleted]
TDL 15y ago
This is a profoundly inaccurate definition of money. https://secure.wikimedia.org/wikipedia/en/wiki/Money https://secure.wikimedia.org/wikipedia/en/wiki/Money Regards, TDL
- chrismealy 15y ago
  Nope, you're wrong: http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867 http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867

bdfh42 15y ago

You can create a currency with the backing of something of value - even the promissory notes of solid citizens - but you cant create a currency from nothing - it has no value. While not intending (I am sure) to be a pyramid scheme (artificial value from short term demand) this is how it will/has inevitably turned out. The concepts underpinning Bitcoin however have a future - as long as the mining is done where wealth is accumulated and not on a GPU.

raganwald 15y ago
I like your comment, however you described Bitcoins as “A pyramid scheme (artificial value from short term demand)." I think the term “speculative bubble” better describes value being primarily driven by short-term demand. A pyramid scheme is described as: A non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. Now, if you needed to pay $100 to become a Bitcoin miner and you received $50 from every other person you recruit to mine Bitcoins, this would be a pyramid scheme.
- mruser 15y ago
  Indeed. I, for one, profited quite well for a few months as one of the many driving speculative conversion rates. I also predicted the short-term effect of the speculation and exited early. I do not see Bitcoin recovering any time soon.
  - bdfh42 15y ago
    QED
TomOfTTB 15y ago
Most of the world's currencies don't have backing these days. Even when they do have some kind of commodity backing them the governments don't tell people how much backing is there (The U.S. Government for example won't tell people how much gold they have in reserve). Backing isn't relevant if you don't know how much of it there is. All a currency really needs to be valuable are two people who have faith in it and who have resources they want to trade with each other. Also for the record the only reason backing is important at all is because backing means there's a finite amount of currency that can be created. Bitcoin has, in theory, an equally valid limiting factor

jonpaul 15y ago

The biggest problem that I have with Bitcoin is that there's a bit of an impedance of trading dollars for BTC and vice versa. When you could use Dwolla, that helped, but now that Dwolla pulled out (at least that's my understanding), it's even more difficult to get BTC. What would be ideal, is to be able to use your credit card to buy BTC. But that won't happen because credit cards need the ability to support charge backs and that makes it difficult with BTC's anonymous nature. Once this problem is solved, I think you'll find a lot more people becoming involved with BTC again.

runn1ng 15y ago
Dwolla pulled out? When exactly?
NinetyNine 15y ago
People on Silk Road offer automatic BTC transfers from various payment companies.

saturn7 15y ago

In the UK Bitcoins are classified as a commodity. It falls under the same rules as buy and selling gold which basically has no formal regulation. I heard somebody define "money" as the most liquid commodity. The commodity that can be exchanged for goods and services the most easily and efficiently is money.

deleted 15y ago

[deleted]