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Bitcoin Plunges By Nearly $30 As Largest Market Suffers Outage

100 points by cooldeal 14y ago

rheide 14y ago
Still worth more than yesterday.
- pkfrank 14y ago
  Isn't this amount of volatility, even if it's trending upwards, a terribly worrying sign, and one that points to a probable bubble burst?
  - TomGullen 14y ago
    Highly volatile doesn't mean it's a bubble
    - dhosek 14y ago
      If you look at the value of a bitcoin graphed over time, it looks an awful lot like a bubble. I sure wouldn't keep any assets in bitcoins. I've seen a lot of bubbles in my 44.5 years on this planet and this looks just like all the others (right down to the claims that "this time it's different"). The biggest difference here is that there is no underlying asset behind the bubble. Heck, even the lowliest failed dotcom had, at the least, some aeron chairs to liquidate when the share price hit zero.
      - matwood 14y ago
        Heck, even the lowliest failed dotcom had, at the least, some aeron chairs to liquidate when the share price hit zero. This got me thinking about what is bitcoins value from a book/intrinsic standpoint. Something like: (electricity to generate coin) + (perceived value of allowing anonymous, non-government transactions) - (liquidity hassle)
        maxerickson 14y ago
        I think you have the electricity on the wrong side of the minus sign.
        matwood 14y ago
        So creating a BTC yields positive electricity?
        maxerickson 14y ago
        No, but if I told you shining a flashlight on quarters made them more valuable you probably wouldn't agree. And it is worse than that, each transaction consumes a bit of electricity (in a hand wavy sense anyway; the chain must go on for the coins to have any worth).
      - boboblong 14y ago
        Of course, people will also claim that this time is different if this time is, in fact, different. http://lesswrong.com/lw/ii/conservation_of_expected_evidence/ http://lesswrong.com/lw/ii/conservation_of_expected_evidence...
  - rheide 14y ago
    To add to that, it also illustrates the over-dependence of the bitcoin community on a single exchange site. What I was trying to show is that, despite those pretty major problems, Bitcoin is still massively popular. Hopefully it can come out on top in the end.
    - impostervt 14y ago
      No one loves Mt. Gox, but it's the biggest exchange...which is why it stays as the biggest exchange, because everyone wants to use the biggest exchange.
  - wmf 14y ago
    Bitcoin is highly volatile and it's a bubble, but these seem to be unrelated problems. The volatility hurts people who are trying to sell alpaca socks and the bubble may hurt speculators.
- anigbrowl 14y ago
  Yes, that's what's troubling about it.
jacob019 14y ago
all this volatility makes owning bitcoin feel like gambling.
- tibbon 14y ago
  A month or two ago, I spent $100 on Bitcoins. I figured this was an acceptable amount to 'gamble' like I was in Vegas. Might go up, might go down- but I found the risk to be acceptable for the amount.
  - Kequc 14y ago
    If I was lucky enough to be in your situation I'd cash out my ~650usd and call it a day. I wouldn't feel remotely bad about it even if bitcoin kept going up. At this point it was a sound investment that paid out well.
    - EvanKelly 14y ago
      I agree. I mined bitcoins for a few months early on (2010). I ended up with about 100 of them. I didn't transfer the wallet when I reformatted the drive a year later because I had completely forgotten about BTC. My loss isn't $10,000, because there's no way I would have held on this long. Realistically, I probably would have sold them once they were 5 USD / BTC.
- klochner 14y ago
  probably because most activity is currently speculation/hoarding rather than actual use.
dmiladinov 14y ago
I might be mistaken here, but isn't Bitcoin the currency with an ultimately fixed amount, with a known, predictable rate of growth (of the number of Bitcoins in existence)? How can this volatility then be attributed to Bitcoin, and not the other currencies it is valued in? I freely admit, I'm less than a novice when it comes to ForEx, but a statement like > "The value of bitcoins, it turns out, is highly sensitive to media coverage," wrote Reuters' influential financial journalist..." seems to me to be exactly the opposite, i.e. media coverage is causing other currencies to fluctuate and the Bitcoin valuations are just a reflection of this.
- milesskorpen 14y ago
  Presumably because the purchasing power of the other currencies isn't fluctuating anywhere near as much. If Bitcoin were stable, you'd expect it to be able to buy basically the same amount of oil, gold, food, etc., no?
- dhosek 14y ago
  Except that the value of goods and services in those currencies have not fluctuated the way that they would if it were the currencies changing value and not bitcoins.
- jjcm 14y ago
  There's a lot of buy-in right now with bitcoin. Because people are seeing the price skyrocket so much, it's made the entire market fairly unstable. People are running huge orders at prices that have never been seen before this week. Since bitcoin isn't backed up by any real-world entity, its valuation is purely what the community thinks it's valued at. Since it's value is tied directly to public opinion, media coverage has huge influences on the price of bitcoin. If forbes does an article stating that bitcoin is the most lucrative investment market, thousands of new orders get placed for bitcoins, driving the price up. If the media says that the bubble is about to pop, they create a self-fulfilling prophecy.
  - dmiladinov 14y ago
    Yes, thanks, this makes a lot of sense.
kmfrk 14y ago
Can we just chip in to a graph in the top-right corner that shows the exchange rate of BTC vs. USD, and leave it at that? I'm sure someone could write an extension for that. Saves us a lot of this. :P
- craftkiller 14y ago
  http://bitcoinity.org/markets?exchange=mtgox http://bitcoinity.org/markets?exchange=mtgox
  - anigbrowl 14y ago
    If this market isn't being manipulated then I'm a monekey's uncle. I've been watching it on and off all afternoon, and I keep seeing it move rationally (ie price changes are a function of the size of the trade) and then irrationally (sudden discontinuities on tiny trades). For example, I just watched it decline from ~126 to 115 over a few minutes, and then suddenly jump up by +10 on a 0.03 BTC trade. Maybe I'm misunderstanding the efect of lag here, but it looks shady as heck. Edit: Also, spreads of over 10% among different markets? Yeesh.
iguana 14y ago
Everyone, sell your bitcoins, quick!
- zalzane 14y ago
  This might have been funny if hundreds of people didn't spam it every day in hopes of manipulating the price. One of the worst part of the bitcoin community right now is the number of armchair speculators who have absolutely no idea what they're doing and think it's clever to go into the bitcoin IRC/forum and allcaps that people need to start selling their bitcoins because "ITS GUNNA CRASH" in a baseless hope that it will drive the price down.
  - iaw 14y ago
    From my armchair I'll simply say : "It's gonna be volatile!" I've stayed out of bitcoin because the market drivers are non-transparent. There are a lot of speculative investors in the market that are waiting for more gains before they close out their positions. Whenever these investors close out you have the potential of increasing the amount of liquid bitcoins in the market. Presuming demand is growing at a continuous clip this would drive the price down to a lower level. Wash, rinse, repeat.
  - iguana 14y ago
    Market corrections due to hacked wallets and DDoS, which is quite interesting to watch. I'm guessing those with heavy bitcoin reserves paid for the DDoS to keep the massive wallet theft from moving the market. Instead, it pushed the clueless speculators out, dropping the price. Whoops.
  - pekk 14y ago
    And what about the people holding lots of BTC who are going on about how it's going to be more stable than the dollar?
rdl 14y ago
MtGox seems like the weakest link in Bitcoin. I don't understand why a Magic the Gathering site is the big exchange still, and yet people keep creating wallet providers (which is kind of cookie cutter and inessential), vs. an exchange (which is inherently centralized, very technical vs. UI/UX centric, security sensitive, technically interesting, and a natural monopoly). There's some value in being a wallet provider with great funding/redemption options, but that's a hard business which touches a lot of regulation and legacy banking. I think the big opportunities in BTC are: hardware/trusted wallets, trusted cloud-hosted wallets, an exchange provider, and most interestingly, derivative issues (currencies, instruments, contracts) with BTC as the underlying. Not "yet another web wallet provider". A wallet provider is essentially retail. An exchange is where wallet providers should be going to offload risk, ideally with the exchange itself taking zero risk; let market makers do it. The only thing the exchange needs to do is publish prices and handle execution/settlement (which is trickier due to the lack of a "bitcoin-USD", "bitcoin-JPY", etc., but can be approximated by retaining USD, JPY, etc. balances on account.
- deleted 14y ago
  [deleted]
- wmf 14y ago
  MtGox is supposed to be replaced by CoinLab (which will still be called MtGox but will apparently be a completely different backend) any day now.
- dan1234 14y ago
  I'd be concerned about the legal angle of running an exchange. Can you just create one or are they regulated? I know it would be different for each region, but at what point does it change from being a web app to something of significant interest a country's financial regulators? As has been said, a wallet is easy and could be run with minimal effort as a side project. I think you'd need a lot more than technical knowledge to be able to manage an exchange.
  - rdl 14y ago
    I could do a fully US licensed one (via CFTC, not SEC) for $500k in legal compliance and ~$2-3mm in dev/ops costs. Costs would be about 25% of that overseas (again, fully licensed by local regulators; at minimum a "no action" private letter ruling that you're not a banking institution (since you don't make loans/take deposits), but just a financial service provider like a traditional currency exchange, but much more ideally a fully recognized financial market with participants). (IANAL of course, and IANAS7)
deepblueocean 14y ago
This demonstrates perhaps the largest real threat to the bitcoin ecosystem right now: the exchange markets are heavily concentrated. Confidence in the system is, right now, heavily based on the perception that Bitcoins can be traded readily for something (pizza, drugs, dollars, quatloos...). Anything that alters that perception will, of course, have a big effect on the price. In fact, exchange risk could lead to something akin to a bank run - the exchanges only keep a small reserve of national currencies and Bitcoins to handle orders and are essentially acting as market makers. But a big swing in the demand for either Bitcoin or real currencies could push the exchanges into a tight spot. If they don't have enough Bitcoin, obviously, the price rises until the demand for Bitcoin subsides. But if they don't have enough (say) dollars, then the price must fall. And there's a natural death spiral: as the price falls, particularly after such a big run up as has happened recently, people might suddenly decide that it's time to get out. But that only increases the demand for (scarce) dollars. And so the value collapses. Here's the real Bitcoin security question: can someone precipitate this situation? Maybe someone who benefits from a collapse of the Bitcoin price (say a law enforcement agency that wants to affect the Silk Road business or, if you don't like that, then say any entity with a significant short position on Bitcoin exchange markets). This is not a question I've seen previously addressed in Bitcoin literature or even musings on the various Bitcoin forums. It's a security economics question. I'm interested in the answer. By the way, my current favorite term for such a situation is the "Goldfinger attack" on the theory that while Goldfinger wanted to steal the gold from Ft. Knox (in the novel version), such an adversary wants to invalidate the coins in Mt. Gox.
- nazgulnarsil 14y ago
  AFAIK MtGox is NOT a market maker but merely an order book.
JumpCrisscross 14y ago
For those wondering why we don't have a Bitcoin ETF, this is one reason. Making a reliable market in decentralised and pseudonymous Bitcoins without an exchange is very difficult. An ETF needs a reliably liquid underlying market to keep a lid on tracking error [def]. We need more competition in U.S. dollar Bitcoin exchanges, preferably a FinCEN-compliant one. [def] http://www.investopedia.com/terms/t/trackingerror.asp http://www.investopedia.com/terms/t/trackingerror.asp
- jpdoctor 14y ago
  Why would anyone want an ETF? They can buy the currency directly at the exchange, and this way don't have to pay some intermediary's salary.
  - rdl 14y ago
    Being able to buy BTC-ETF would be nice within your 401k/Roth IRA/etc. (It would also be awesome to get a 401k to offer BTC, even if it has to be within a "self directed" fund. I think I know someone on hn who has family members in the 401k administrator business...)
  - BrainInAJar 14y ago
    Same reason NYSEARCA:GLD and others exist, so you don't have to worry about securing the underlying (your broker/trading platform takes care of it), you can short it easier, etc.
  - hkmurakami 14y ago
    Transaction fees are lower in standard financial outlets.
dangrossman 14y ago
MtGox just tweeted 5 minutes ago that they're being hit by a DDoS. Their site is essentially non-functional beyond the public cacheable static pages. https://twitter.com/MtGox/status/319563995759652864 https://twitter.com/MtGox/status/319563995759652864
nlh 14y ago
I feel a bit silly writing essentially the same comment twice in a week, but... Holy cow. Bitcoin was at $145? I wrote a comment 6 days ago expressing shock that it was at $100, since the last time I checked it had been at $60. If a 45% rise in one week coming on the heels of a 300% rise in one month doesn't raise your eyebrows, I don't know what will. I continue to watch this unfold, fascinated, popcorn at the ready.
- tatsuke95 14y ago
  >"I don't know what will." The major exchange getting DDOS'd, a popular online wallet service provider getting hacked, and a plunge in the price of Bitcoins perhaps. All of this days after the discussion around here was about BitCoins usurping major currencies. I don't get it.
- ChrisNorstrom 14y ago
  I lost money in the last bitcoin crash because I bought right before it all went downhill. It's obvious people aren't using bitcoin to shop, but instead using it as an investment. In one quick moment heard mentality will respond by "cashing out" their bitcoins for money (something that is actually accepted and can be used to by things) and this will create a chain reaction. One by one everyone will flip out, won't want to miss out on their cash, and start purging their bitcoins for ever lower numbers until the currency is devalued. There will be another crash, people will forget or think "things will be different this time", and will once again start building the next bitcoin bubble. I think I might actually buy some during the crash when they're real cheap. Every year bitcoin's popularity rises and more people get suckered into it.
  - modeless 14y ago
    You only lost money if you sold your bitcoins. If you bought bitcoins at the instant before the last crash, you'd still have more than doubled your money even now after the $30 drop. Bitcoin may crash to $1 tomorrow; who cares? The real question is where will Bitcoin be a year from now, and 10 years from now?
dragontamer 14y ago
Wait a second... are we sure it was the Market Outage? I'd assume it was when Instawallet's hackers began cashing out on their attack?
- dublinben 14y ago
  Why would they dump large amounts of currency (and plunge the price) when they can just sell it slowly? There's no risk from holding stolen BTC long term.
  - dragontamer 14y ago
    Sure there is. If Mt. Gox goes down before you dump BTC, then you wouldn't be able to convert BTC back into dollars. Mt. Gox has been pretty unreliable recently too...
bennyg 14y ago
To think that last July it was at about $5.20, and I scoffed at buying when it reached $6 cause that was more money than I was willing to spend... I'd be rich by now.
- qwertzlcoatl 14y ago
  That is pretty much everyone's thought that knew about Bitcoin since the beginning. Which should be 90% of people frequenting this website.
  - chm 14y ago
    I mined for a week or so in 2011. I wish I had kept on going!
superuser2 14y ago
It's back at $126 now.
- qwertzlcoatl 14y ago
  54 minutes later it's at $132.
PaperclipTaken 14y ago
First I want to remember that Bitcoin cost $10 less 24 hours before the $30 plunge than it did afterwards. Having said that, I don't believe that it will go back up, most speculators will probably be ready to sell after today. It's also hard to say though, because it looks like the volume of bitcoins traded today are equal or less than other days. I can't say for sure, because Mt. Gox isn't loading properly and I'm looking at an unfamiliar set of graphs. People keep talking about the bubble bursting. Most people don't realize that last time bitcoin flopped, it only lost 30-50% value initially, returning to a value that was still higher than just 2 months before the crash. Bitcoin spent 5 months in a steady decline, not 5 hours. Most early speculators made a profit, even if they couldn't sell until after the crash. As much insanity as people are predicting, everything will probably be drawn out. If you have bitcoins and are nervous, now is a fine time to sell. If you think bitcoin will keep going up and you bought more than 30 days ago, you will probably be able to come out ahead even if you are wrong. But you have to appreciate that most of Bitcoin is speculation. Bitcoin seems safe because it is inherently deflationary. That brings an unproportionate amount of speculators to the currency, and causes the deflationary properties to exaggerate. After enough time, the currency will become clearly overvalued. The free market will take care of that in a cyclic fashion. As long as Bitcoin is used by people for it's anonymous and cryptographic properties, it will be subject to this hyperdeflation/crash cycle. The exiting bits don't last long and ultimately don't make the currency gain or lose terribly extraordinary amounts of value. After a crash, I'm sure bitcoin will still be worth at least $60, which is still fantastic if you bought back when it was less than $15.
- Helianthus 14y ago
  I don't think you're wrong on any particular point. But all of this is what makes Bitcoin irrelevant to the global financial system. A currency can't be used for daily purchases if you have to account for cyclical periods where you just shouldn't spend them! Couple this with the fact that this time enough of the mainstream media is paying attention, and Bitcoin won't recover. I'd bet a Bitcoin that this is the highest valuation of Bitcoin over its career as a highly interesting experiment in economics.
  - 14y ago
freefrag 14y ago
Reminds me of this life-cycle of a bubble [1]. I know this drop wasn't caused by a loss of confidence in the currency but in the exchange, still I wonder if this was the bull-trap. [1] http://i158.photobucket.com/albums/t106/OnlyObvious/CDOs/bubble-lifecyclegif.jpg http://i158.photobucket.com/albums/t106/OnlyObvious/CDOs/bub...
andrewljohnson 14y ago
BitCoin is back at 131, still up since the Euro-crisis went to bed yesterday.
ihsw 14y ago
The conspiracy theorist in me suspects that the US Government may be involved, sinking their tentacles into MtGox and tracking every transaction. I seem to recall a global Skype outage shortly after MS purchased the company, and this is eerily similar. I would haphazard to guess that most BTC transactions are USD->BTC so the USG would definitely be interested in that.
- wmf 14y ago
  Conspiracy theories are not necessary in this case. MtGox has had extensive know your customer procedures in place for a while. FinCEN recently issued explicit regulations for Bitcoin and MtGox indicated that they're already "overcompliant" with them. And MtGox is moving from Japan to the US just to be sure. There's no evidence that MtGox is sending every transaction to the US government, but it sure looks like they would voluntarily do so if asked; no hacking needed.
blantonl 14y ago
I'm curious, are there any academic level economic arguments that discuss Bitcoin and it's future? I'm really curious how economists are viewing Bitcoin. Right now, it is clear that the rise in price is due to investors who see the potential of Bitcoin, thus they are hoarding Bitcoins in anticipation of future avenues that could accept Bitcoins. All it will take to unleash liquidity in the Bitcoin market will be a major online retailer to announce they accept Bitcoins as a currency. Otherwise, the vast majority of Bitcoin transactions will be trading in iliiquid markets and paying for underground goods and services. Bitcoin isn't going to shake up the traditional goods and services market unless a major online retailer signs up. ... and with a very illiquid market and an immature set of market makers in the currency, it is going to be a while before Bitcoin is legit. Not to mention potential regulatory issues that WILL crop up at some point. Bitcoin - good luck. I think it can work, but will it work is a whole different story.
- gwern 14y ago
  > I'm curious, are there any academic level economic arguments that discuss Bitcoin and it's future? I'm really curious how economists are viewing Bitcoin. Here, this may help: http://scholar.google.com/scholar?q=Bitcoin http://scholar.google.com/scholar?q=Bitcoin
vamur 14y ago
Bitcoin price should stabilize if there are more transactions. Biggest issues now are slow payment time, hoarders and over-reliance on few exchanges. I think higher price and faster payment/withdrawal times would decrease the price eventually as bitcoin holders would have more incentive to spend/take profit while the price is high and exchanges would be forced to sell coins after a transaction for merchant withdrawals. For hoarding, if protocol can be updated to charge higher transaction fee for long-held coins, this should make it less profitable to hoard and increase number of transactions.
jrs235 14y ago
Why bit coin is a bad currency or store of value? If the grid is harmed then but coins may rise in value but if you still have access to your store, trading will be as reliable and fruitful as eating gold to survive. It's too susceptible to an EMP attack and war (which brings down the infrastructure or grid). Paper wealth only appears on paper.

100 points by cooldeal 14y ago

rheide 14y ago

Still worth more than yesterday.

pkfrank 14y ago
Isn't this amount of volatility, even if it's trending upwards, a terribly worrying sign, and one that points to a probable bubble burst?
- TomGullen 14y ago
  Highly volatile doesn't mean it's a bubble
  - dhosek 14y ago
    If you look at the value of a bitcoin graphed over time, it looks an awful lot like a bubble. I sure wouldn't keep any assets in bitcoins. I've seen a lot of bubbles in my 44.5 years on this planet and this looks just like all the others (right down to the claims that "this time it's different"). The biggest difference here is that there is no underlying asset behind the bubble. Heck, even the lowliest failed dotcom had, at the least, some aeron chairs to liquidate when the share price hit zero.
    - matwood 14y ago
      Heck, even the lowliest failed dotcom had, at the least, some aeron chairs to liquidate when the share price hit zero. This got me thinking about what is bitcoins value from a book/intrinsic standpoint. Something like: (electricity to generate coin) + (perceived value of allowing anonymous, non-government transactions) - (liquidity hassle)
      - maxerickson 14y ago
        I think you have the electricity on the wrong side of the minus sign.
        matwood 14y ago
        So creating a BTC yields positive electricity?
        maxerickson 14y ago
        No, but if I told you shining a flashlight on quarters made them more valuable you probably wouldn't agree. And it is worse than that, each transaction consumes a bit of electricity (in a hand wavy sense anyway; the chain must go on for the coins to have any worth).
    - boboblong 14y ago
      Of course, people will also claim that this time is different if this time is, in fact, different. http://lesswrong.com/lw/ii/conservation_of_expected_evidence/ http://lesswrong.com/lw/ii/conservation_of_expected_evidence...
- rheide 14y ago
  To add to that, it also illustrates the over-dependence of the bitcoin community on a single exchange site. What I was trying to show is that, despite those pretty major problems, Bitcoin is still massively popular. Hopefully it can come out on top in the end.
  - impostervt 14y ago
    No one loves Mt. Gox, but it's the biggest exchange...which is why it stays as the biggest exchange, because everyone wants to use the biggest exchange.
- wmf 14y ago
  Bitcoin is highly volatile and it's a bubble, but these seem to be unrelated problems. The volatility hurts people who are trying to sell alpaca socks and the bubble may hurt speculators.
anigbrowl 14y ago
Yes, that's what's troubling about it.

jacob019 14y ago

all this volatility makes owning bitcoin feel like gambling.

tibbon 14y ago
A month or two ago, I spent $100 on Bitcoins. I figured this was an acceptable amount to 'gamble' like I was in Vegas. Might go up, might go down- but I found the risk to be acceptable for the amount.
- Kequc 14y ago
  If I was lucky enough to be in your situation I'd cash out my ~650usd and call it a day. I wouldn't feel remotely bad about it even if bitcoin kept going up. At this point it was a sound investment that paid out well.
  - EvanKelly 14y ago
    I agree. I mined bitcoins for a few months early on (2010). I ended up with about 100 of them. I didn't transfer the wallet when I reformatted the drive a year later because I had completely forgotten about BTC. My loss isn't $10,000, because there's no way I would have held on this long. Realistically, I probably would have sold them once they were 5 USD / BTC.
klochner 14y ago
probably because most activity is currently speculation/hoarding rather than actual use.

dmiladinov 14y ago

I might be mistaken here, but isn't Bitcoin the currency with an ultimately fixed amount, with a known, predictable rate of growth (of the number of Bitcoins in existence)? How can this volatility then be attributed to Bitcoin, and not the other currencies it is valued in? I freely admit, I'm less than a novice when it comes to ForEx, but a statement like > "The value of bitcoins, it turns out, is highly sensitive to media coverage," wrote Reuters' influential financial journalist..." seems to me to be exactly the opposite, i.e. media coverage is causing other currencies to fluctuate and the Bitcoin valuations are just a reflection of this.

milesskorpen 14y ago
Presumably because the purchasing power of the other currencies isn't fluctuating anywhere near as much. If Bitcoin were stable, you'd expect it to be able to buy basically the same amount of oil, gold, food, etc., no?
dhosek 14y ago
Except that the value of goods and services in those currencies have not fluctuated the way that they would if it were the currencies changing value and not bitcoins.
jjcm 14y ago
There's a lot of buy-in right now with bitcoin. Because people are seeing the price skyrocket so much, it's made the entire market fairly unstable. People are running huge orders at prices that have never been seen before this week. Since bitcoin isn't backed up by any real-world entity, its valuation is purely what the community thinks it's valued at. Since it's value is tied directly to public opinion, media coverage has huge influences on the price of bitcoin. If forbes does an article stating that bitcoin is the most lucrative investment market, thousands of new orders get placed for bitcoins, driving the price up. If the media says that the bubble is about to pop, they create a self-fulfilling prophecy.
- dmiladinov 14y ago
  Yes, thanks, this makes a lot of sense.

kmfrk 14y ago

Can we just chip in to a graph in the top-right corner that shows the exchange rate of BTC vs. USD, and leave it at that? I'm sure someone could write an extension for that. Saves us a lot of this. :P

craftkiller 14y ago
http://bitcoinity.org/markets?exchange=mtgox http://bitcoinity.org/markets?exchange=mtgox
- anigbrowl 14y ago
  If this market isn't being manipulated then I'm a monekey's uncle. I've been watching it on and off all afternoon, and I keep seeing it move rationally (ie price changes are a function of the size of the trade) and then irrationally (sudden discontinuities on tiny trades). For example, I just watched it decline from ~126 to 115 over a few minutes, and then suddenly jump up by +10 on a 0.03 BTC trade. Maybe I'm misunderstanding the efect of lag here, but it looks shady as heck. Edit: Also, spreads of over 10% among different markets? Yeesh.

iguana 14y ago

Everyone, sell your bitcoins, quick!

zalzane 14y ago
This might have been funny if hundreds of people didn't spam it every day in hopes of manipulating the price. One of the worst part of the bitcoin community right now is the number of armchair speculators who have absolutely no idea what they're doing and think it's clever to go into the bitcoin IRC/forum and allcaps that people need to start selling their bitcoins because "ITS GUNNA CRASH" in a baseless hope that it will drive the price down.
- iaw 14y ago
  From my armchair I'll simply say : "It's gonna be volatile!" I've stayed out of bitcoin because the market drivers are non-transparent. There are a lot of speculative investors in the market that are waiting for more gains before they close out their positions. Whenever these investors close out you have the potential of increasing the amount of liquid bitcoins in the market. Presuming demand is growing at a continuous clip this would drive the price down to a lower level. Wash, rinse, repeat.
- iguana 14y ago
  Market corrections due to hacked wallets and DDoS, which is quite interesting to watch. I'm guessing those with heavy bitcoin reserves paid for the DDoS to keep the massive wallet theft from moving the market. Instead, it pushed the clueless speculators out, dropping the price. Whoops.
- pekk 14y ago
  And what about the people holding lots of BTC who are going on about how it's going to be more stable than the dollar?

rdl 14y ago

MtGox seems like the weakest link in Bitcoin. I don't understand why a Magic the Gathering site is the big exchange still, and yet people keep creating wallet providers (which is kind of cookie cutter and inessential), vs. an exchange (which is inherently centralized, very technical vs. UI/UX centric, security sensitive, technically interesting, and a natural monopoly). There's some value in being a wallet provider with great funding/redemption options, but that's a hard business which touches a lot of regulation and legacy banking. I think the big opportunities in BTC are: hardware/trusted wallets, trusted cloud-hosted wallets, an exchange provider, and most interestingly, derivative issues (currencies, instruments, contracts) with BTC as the underlying. Not "yet another web wallet provider". A wallet provider is essentially retail. An exchange is where wallet providers should be going to offload risk, ideally with the exchange itself taking zero risk; let market makers do it. The only thing the exchange needs to do is publish prices and handle execution/settlement (which is trickier due to the lack of a "bitcoin-USD", "bitcoin-JPY", etc., but can be approximated by retaining USD, JPY, etc. balances on account.

deleted 14y ago
[deleted]
wmf 14y ago
MtGox is supposed to be replaced by CoinLab (which will still be called MtGox but will apparently be a completely different backend) any day now.
dan1234 14y ago
I'd be concerned about the legal angle of running an exchange. Can you just create one or are they regulated? I know it would be different for each region, but at what point does it change from being a web app to something of significant interest a country's financial regulators? As has been said, a wallet is easy and could be run with minimal effort as a side project. I think you'd need a lot more than technical knowledge to be able to manage an exchange.
- rdl 14y ago
  I could do a fully US licensed one (via CFTC, not SEC) for $500k in legal compliance and ~$2-3mm in dev/ops costs. Costs would be about 25% of that overseas (again, fully licensed by local regulators; at minimum a "no action" private letter ruling that you're not a banking institution (since you don't make loans/take deposits), but just a financial service provider like a traditional currency exchange, but much more ideally a fully recognized financial market with participants). (IANAL of course, and IANAS7)

deepblueocean 14y ago

This demonstrates perhaps the largest real threat to the bitcoin ecosystem right now: the exchange markets are heavily concentrated. Confidence in the system is, right now, heavily based on the perception that Bitcoins can be traded readily for something (pizza, drugs, dollars, quatloos...). Anything that alters that perception will, of course, have a big effect on the price. In fact, exchange risk could lead to something akin to a bank run - the exchanges only keep a small reserve of national currencies and Bitcoins to handle orders and are essentially acting as market makers. But a big swing in the demand for either Bitcoin or real currencies could push the exchanges into a tight spot. If they don't have enough Bitcoin, obviously, the price rises until the demand for Bitcoin subsides. But if they don't have enough (say) dollars, then the price must fall. And there's a natural death spiral: as the price falls, particularly after such a big run up as has happened recently, people might suddenly decide that it's time to get out. But that only increases the demand for (scarce) dollars. And so the value collapses. Here's the real Bitcoin security question: can someone precipitate this situation? Maybe someone who benefits from a collapse of the Bitcoin price (say a law enforcement agency that wants to affect the Silk Road business or, if you don't like that, then say any entity with a significant short position on Bitcoin exchange markets). This is not a question I've seen previously addressed in Bitcoin literature or even musings on the various Bitcoin forums. It's a security economics question. I'm interested in the answer. By the way, my current favorite term for such a situation is the "Goldfinger attack" on the theory that while Goldfinger wanted to steal the gold from Ft. Knox (in the novel version), such an adversary wants to invalidate the coins in Mt. Gox.

nazgulnarsil 14y ago
AFAIK MtGox is NOT a market maker but merely an order book.

JumpCrisscross 14y ago

For those wondering why we don't have a Bitcoin ETF, this is one reason. Making a reliable market in decentralised and pseudonymous Bitcoins without an exchange is very difficult. An ETF needs a reliably liquid underlying market to keep a lid on tracking error [def]. We need more competition in U.S. dollar Bitcoin exchanges, preferably a FinCEN-compliant one. [def] http://www.investopedia.com/terms/t/trackingerror.asp http://www.investopedia.com/terms/t/trackingerror.asp

jpdoctor 14y ago
Why would anyone want an ETF? They can buy the currency directly at the exchange, and this way don't have to pay some intermediary's salary.
- rdl 14y ago
  Being able to buy BTC-ETF would be nice within your 401k/Roth IRA/etc. (It would also be awesome to get a 401k to offer BTC, even if it has to be within a "self directed" fund. I think I know someone on hn who has family members in the 401k administrator business...)
- BrainInAJar 14y ago
  Same reason NYSEARCA:GLD and others exist, so you don't have to worry about securing the underlying (your broker/trading platform takes care of it), you can short it easier, etc.
- hkmurakami 14y ago
  Transaction fees are lower in standard financial outlets.

dangrossman 14y ago

MtGox just tweeted 5 minutes ago that they're being hit by a DDoS. Their site is essentially non-functional beyond the public cacheable static pages. https://twitter.com/MtGox/status/319563995759652864 https://twitter.com/MtGox/status/319563995759652864

nlh 14y ago

I feel a bit silly writing essentially the same comment twice in a week, but... Holy cow. Bitcoin was at $145? I wrote a comment 6 days ago expressing shock that it was at $100, since the last time I checked it had been at $60. If a 45% rise in one week coming on the heels of a 300% rise in one month doesn't raise your eyebrows, I don't know what will. I continue to watch this unfold, fascinated, popcorn at the ready.

tatsuke95 14y ago
>"I don't know what will." The major exchange getting DDOS'd, a popular online wallet service provider getting hacked, and a plunge in the price of Bitcoins perhaps. All of this days after the discussion around here was about BitCoins usurping major currencies. I don't get it.
ChrisNorstrom 14y ago
I lost money in the last bitcoin crash because I bought right before it all went downhill. It's obvious people aren't using bitcoin to shop, but instead using it as an investment. In one quick moment heard mentality will respond by "cashing out" their bitcoins for money (something that is actually accepted and can be used to by things) and this will create a chain reaction. One by one everyone will flip out, won't want to miss out on their cash, and start purging their bitcoins for ever lower numbers until the currency is devalued. There will be another crash, people will forget or think "things will be different this time", and will once again start building the next bitcoin bubble. I think I might actually buy some during the crash when they're real cheap. Every year bitcoin's popularity rises and more people get suckered into it.
- modeless 14y ago
  You only lost money if you sold your bitcoins. If you bought bitcoins at the instant before the last crash, you'd still have more than doubled your money even now after the $30 drop. Bitcoin may crash to $1 tomorrow; who cares? The real question is where will Bitcoin be a year from now, and 10 years from now?

dragontamer 14y ago

Wait a second... are we sure it was the Market Outage? I'd assume it was when Instawallet's hackers began cashing out on their attack?

dublinben 14y ago
Why would they dump large amounts of currency (and plunge the price) when they can just sell it slowly? There's no risk from holding stolen BTC long term.
- dragontamer 14y ago
  Sure there is. If Mt. Gox goes down before you dump BTC, then you wouldn't be able to convert BTC back into dollars. Mt. Gox has been pretty unreliable recently too...

bennyg 14y ago

To think that last July it was at about $5.20, and I scoffed at buying when it reached $6 cause that was more money than I was willing to spend... I'd be rich by now.

qwertzlcoatl 14y ago
That is pretty much everyone's thought that knew about Bitcoin since the beginning. Which should be 90% of people frequenting this website.
- chm 14y ago
  I mined for a week or so in 2011. I wish I had kept on going!

superuser2 14y ago

It's back at $126 now.

qwertzlcoatl 14y ago
54 minutes later it's at $132.

PaperclipTaken 14y ago

First I want to remember that Bitcoin cost $10 less 24 hours before the $30 plunge than it did afterwards. Having said that, I don't believe that it will go back up, most speculators will probably be ready to sell after today. It's also hard to say though, because it looks like the volume of bitcoins traded today are equal or less than other days. I can't say for sure, because Mt. Gox isn't loading properly and I'm looking at an unfamiliar set of graphs. People keep talking about the bubble bursting. Most people don't realize that last time bitcoin flopped, it only lost 30-50% value initially, returning to a value that was still higher than just 2 months before the crash. Bitcoin spent 5 months in a steady decline, not 5 hours. Most early speculators made a profit, even if they couldn't sell until after the crash. As much insanity as people are predicting, everything will probably be drawn out. If you have bitcoins and are nervous, now is a fine time to sell. If you think bitcoin will keep going up and you bought more than 30 days ago, you will probably be able to come out ahead even if you are wrong. But you have to appreciate that most of Bitcoin is speculation. Bitcoin seems safe because it is inherently deflationary. That brings an unproportionate amount of speculators to the currency, and causes the deflationary properties to exaggerate. After enough time, the currency will become clearly overvalued. The free market will take care of that in a cyclic fashion. As long as Bitcoin is used by people for it's anonymous and cryptographic properties, it will be subject to this hyperdeflation/crash cycle. The exiting bits don't last long and ultimately don't make the currency gain or lose terribly extraordinary amounts of value. After a crash, I'm sure bitcoin will still be worth at least $60, which is still fantastic if you bought back when it was less than $15.

Helianthus 14y ago
I don't think you're wrong on any particular point. But all of this is what makes Bitcoin irrelevant to the global financial system. A currency can't be used for daily purchases if you have to account for cyclical periods where you just shouldn't spend them! Couple this with the fact that this time enough of the mainstream media is paying attention, and Bitcoin won't recover. I'd bet a Bitcoin that this is the highest valuation of Bitcoin over its career as a highly interesting experiment in economics.
- 14y ago

freefrag 14y ago

Reminds me of this life-cycle of a bubble [1]. I know this drop wasn't caused by a loss of confidence in the currency but in the exchange, still I wonder if this was the bull-trap. [1] http://i158.photobucket.com/albums/t106/OnlyObvious/CDOs/bubble-lifecyclegif.jpg http://i158.photobucket.com/albums/t106/OnlyObvious/CDOs/bub...

andrewljohnson 14y ago

BitCoin is back at 131, still up since the Euro-crisis went to bed yesterday.

ihsw 14y ago

The conspiracy theorist in me suspects that the US Government may be involved, sinking their tentacles into MtGox and tracking every transaction. I seem to recall a global Skype outage shortly after MS purchased the company, and this is eerily similar. I would haphazard to guess that most BTC transactions are USD->BTC so the USG would definitely be interested in that.

wmf 14y ago
Conspiracy theories are not necessary in this case. MtGox has had extensive know your customer procedures in place for a while. FinCEN recently issued explicit regulations for Bitcoin and MtGox indicated that they're already "overcompliant" with them. And MtGox is moving from Japan to the US just to be sure. There's no evidence that MtGox is sending every transaction to the US government, but it sure looks like they would voluntarily do so if asked; no hacking needed.

blantonl 14y ago

I'm curious, are there any academic level economic arguments that discuss Bitcoin and it's future? I'm really curious how economists are viewing Bitcoin. Right now, it is clear that the rise in price is due to investors who see the potential of Bitcoin, thus they are hoarding Bitcoins in anticipation of future avenues that could accept Bitcoins. All it will take to unleash liquidity in the Bitcoin market will be a major online retailer to announce they accept Bitcoins as a currency. Otherwise, the vast majority of Bitcoin transactions will be trading in iliiquid markets and paying for underground goods and services. Bitcoin isn't going to shake up the traditional goods and services market unless a major online retailer signs up. ... and with a very illiquid market and an immature set of market makers in the currency, it is going to be a while before Bitcoin is legit. Not to mention potential regulatory issues that WILL crop up at some point. Bitcoin - good luck. I think it can work, but will it work is a whole different story.

gwern 14y ago
> I'm curious, are there any academic level economic arguments that discuss Bitcoin and it's future? I'm really curious how economists are viewing Bitcoin. Here, this may help: http://scholar.google.com/scholar?q=Bitcoin http://scholar.google.com/scholar?q=Bitcoin

vamur 14y ago

Bitcoin price should stabilize if there are more transactions. Biggest issues now are slow payment time, hoarders and over-reliance on few exchanges. I think higher price and faster payment/withdrawal times would decrease the price eventually as bitcoin holders would have more incentive to spend/take profit while the price is high and exchanges would be forced to sell coins after a transaction for merchant withdrawals. For hoarding, if protocol can be updated to charge higher transaction fee for long-held coins, this should make it less profitable to hoard and increase number of transactions.

jrs235 14y ago

Why bit coin is a bad currency or store of value? If the grid is harmed then but coins may rise in value but if you still have access to your store, trading will be as reliable and fruitful as eating gold to survive. It's too susceptible to an EMP attack and war (which brings down the infrastructure or grid). Paper wealth only appears on paper.