Bitcoin Value has Dropped 40 Percent in 2015

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Bitcoin Value has Dropped 40 Percent in 2015

Bitcoins

After two back-to-back sharp drops this week alone, Bitcoin now sits under USD $200.

Bitcoin is officially in free fall, although "doomed," might be a bit too strong for now.

After $5 million worth of Bitcoin was stolen from exchange giant Bitstamp last week, the price of the popular, anonymous, and sometimes unpredictable cash dipped below USD $300. As of this afternoon, Bitcoin's price now sits at roughly $180 -- up from the day's low of $170.08, and down from the opening price of $226.94. That's a 20 percent price drop in one day of trading.

(All prices come via CoinDesk, but there are several exchanges and trackers available.)

What's causing Bitcoin to drop? CNBC was told there's no concrete explanation, but the most likely culprit is the Bitstamp heist from last week. If an institution that promises to safeguard your unregulated digital currency is fleeced of $5 million? That's sure to rattle a few investor cages.

But this is down period that Bitcoin could easily survive. Despite hitting highs of over $1,000 in 2013, Bitcoin has already had its fair share of crisis. As Vox points out, the value of Bitcoin once dropped early on from $32 to $2.

Bitcoin, even after getting love from the likes of Microsoft, and legitimacy from certain kinds of financial bodies, is still new, and still a little scary for the uninitiated.

Meanwhile, Dogecoin is sitting pretty at about 11 cents (USD) per 1,000. Make it rain. Wow. Much wealth.

Sources: CNBC | Vox

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This stuff isn't currency. It's volatile stock, that can be used to directly buy some things online (or launder your mob money).

Hairless Mammoth:
This stuff isn't currency. It's volatile stock, that can be used to directly buy some things online (or launder your mob money).

The stuff is more legit currency than the fiat stuff we use now. Besides it was the first

You mean the money handled by people who never learned economics is useless? Prepostorous!

Well, look at that. The guy on Youtube with the playlist about the failure of bitcoin was right. Call me unsurprised. And hey, why not? Ya know what it is? Digital fraud and counterfeitting, the systematic creation of fake money to swindle others out of their real currency.

I'd make a snarky comment but I just know we're going to start hearing the sob stories of people who converted all of their personal wealth into that currency and that'll just make me shake my head in disgust more than laugh. I never had faith in bitcoin.

I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing?? But seriously you expect to be able to make money just pop into existence all without actually contributing anything of value back to the world. You generate fake currency by completing an arbitrary and completely meaningless task and you expect it to be worth something? The fact that the money you're holding could one day be worth 10 times the amount it is in a year's time and none of you see anything wrong with that. It's worse than the exchange rates and inflation of real money.

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics

That's basically what happens with the currency in use now ever since the gold standard was removed.

Alexander Kirby:
to it so that other users can eventually make more of it out of... nothing?? But seriously you expect to be able to make money just pop into existence all without actually contributing anything of value back to the world.

That's what banks do through fractional reserve lending.

The benefit of bitcoin is the number of them that can ever be produced is limited. As time goes on less can be mined and eventually a limit will be reached, this is why the gold standard was used for so long.

The other benefit is the blockchain, which is a ledger that records all transactions of bitcoin is recorded so it is known how much is in the system at all time, thus removing any chance of fraud within the bitcoin system.

The fact is that bitcoin is treated more of a commodity than a currency and that is the reason we see such a volatile market for it, and of course mistakes made by exchanges in regards of keeping bitcoin reserves secure. The system is from far perfect, but it is a more legitimate form of currency in theory, than this debt based fiat currency we have now that has lead to numerous problems, including the biggest debt and inequality in the history of the world.

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing?? But seriously you expect to be able to make money just pop into existence all without actually contributing anything of value back to the world. You generate fake currency by completing an arbitrary and completely meaningless task and you expect it to be worth something? The fact that the money you're holding could one day be worth 10 times the amount it is in a year's time and none of you see anything wrong with that. It's worse than the exchange rates and inflation of real money.

Indeed. I know a lot of people have this infatuation with "sticking it to the man" and love the idea of a currency completely independent of any government, but there is a damn good reason we have central banks like the federal reserve, EZB etc. Money inherently serves three purposes:

1. Means of transferring value (as opposed to bartering)
2. Means of preserving value
3. Means of measuring value

At the moment, the only purpose bitcoins can fulfill in any meaningful way is the first, but the extreme volatility of its value leave the second and third condition completely unfulfilled. As such I cannot consider it a currency. In fact, since there is no real entity to give it value or to pay dividends or interest, such as a government or a company, it can't even really be considered a stock or obligation either. It's essentially a glorified vehicle for speculation.

Fat_Hippo:

Indeed. I know a lot of people have this infatuation with "sticking it to the man" and love the idea of a currency completely independent of any government, but there is a damn good reason we have central banks like the federal reserve, EZB etc. Money inherently serves three purposes:

1. Means of transferring value (as opposed to bartering)
2. Means of preserving value
3. Means of measuring value

At the moment, the only purpose bitcoins can fulfill in any meaningful way is the first, but the extreme volatility of its value leave the second and third condition completely unfulfilled. As such I cannot consider it a currency. In fact, since there is no real entity to give it value or to pay dividends or interest, such as a government or a company, it can't even really be considered a stock or obligation either. It's essentially a glorified vehicle for speculation.

Unfortunately, it is a lot more than sticking it to the man, a lot of people like bitcoin due to its resemblance of having a currency pegged to the gold standard back in the day. That was the only time the currency which we use now ticked all 3 boxes. Since we have come off the gold standard and now use a debt based currency it has inherently made your last two points null as all money created now is now created with a debt attached. Since their is only ever the amount of money created in the system, there is no extra money to cover the debt created when the money came into existence, making it pretty worthless piece of paper. The only thing that gives our current monetary system any legitimacy is the promise that governments wont print too much of it, which has gone out the window since 2008. If countries keep printing money at the rate they are doing it is going to get to a point where we can't service the debt soon and the whole house of cards will come tumbling down. Bitcoin is an interesting experiment, and still in its early phases, and with the volatility of global markets as they are i expect we will see bitcoin rise and fall on a regular basis for the foreseeable future, though i suspect its value has already peaked.
As for comparing it to a stock, I'd say it was more akin to a commodity.

flarty:

Fat_Hippo:

Indeed. I know a lot of people have this infatuation with "sticking it to the man" and love the idea of a currency completely independent of any government, but there is a damn good reason we have central banks like the federal reserve, EZB etc. Money inherently serves three purposes:

1. Means of transferring value (as opposed to bartering)
2. Means of preserving value
3. Means of measuring value

At the moment, the only purpose bitcoins can fulfill in any meaningful way is the first, but the extreme volatility of its value leave the second and third condition completely unfulfilled. As such I cannot consider it a currency. In fact, since there is no real entity to give it value or to pay dividends or interest, such as a government or a company, it can't even really be considered a stock or obligation either. It's essentially a glorified vehicle for speculation.

Unfortunately, it is a lot more than sticking it to the man, a lot of people like bitcoin due to its resemblance of having a currency pegged to the gold standard back in the day. That was the only time the currency which we use now ticked all 3 boxes. Since we have come off the gold standard and now use a debt based currency it has inherently made your last two points null as all money created now is now created with a debt attached. Since their is only ever the amount of money created in the system, there is no extra money to cover the debt created when the money came into existence, making it pretty worthless piece of paper. The only thing that gives our current monetary system any legitimacy is the promise that governments wont print too much of it, which has gone out the window since 2008. If countries keep printing money at the rate they are doing it is going to get to a point where we can't service the debt soon and the whole house of cards will come tumbling down. Bitcoin is an interesting experiment, and still in its early phases, and with the volatility of global markets as they are i expect we will see bitcoin rise and fall on a regular basis for the foreseeable future, though i suspect its value has already peaked.
As for comparing it to a stock, I'd say it was more akin to a commodity.

There is a good reason western governments are "printing" money in the fashion which they are, which is to (1) prevent a collapse of the banking system and (2) also prevent a deflation which would be absolutely fatal for the economy.

1. The central banks are not simply creating money, but are rather offering it to private banks at an extremely low interest rate, which was very important following the banking crisis, as banks were no longer lending money to each other, which could quickly lead them into a situation where they would run of liquidity. Because they would no longer lend to each other, it only made the sudden shortfall of liquidity even more dangerous, so this was a very necessary measure.

2. The fact that banks no longer lend each other money, and are instead hoarding lots of liquidity also has the important effect that it drastically lowers the actual amount of money in the system. In a situation such as this, even though the central bank has increased the amount of "printed" money, referred to as M0, the real amount of money in the system, which is actually being circulated, can still decrease, leading to deflation. We witnessed this phenomenon during the great depression, during which the government did not react in a meaningful manner in terms of monetary policy. So in the situation our government have found themselves in, lowering the interest rate and flooding the system with "cheap" liquidity was the only correct decision.

It is true that governments should slowly start easing off this policy in the near future, but timing is vital. Do it too quickly, and you risk a new collapse of the banking system, and make no mistake, many European banks are still in an absolutely terrible situation. Do it too slowly, and we risk massive inflation. It's a tightrope that has to be walked, but the central banks acted correctly given the situation, and can not be faulted for the increased amount of money that has been created, as the real amount of money hasn't changed very much at all.

Fat_Hippo:

There is a good reason western governments are "printing" money in the fashion which they are, which is to (1) prevent a collapse of the banking system and (2) also prevent a deflation which would be absolutely fatal for the economy.

1. The central banks are not simply creating money, but are rather offering it to private banks at an extremely low interest rate, which was very important following the banking crisis, as banks were no longer lending money to each other, which could quickly lead them into a situation where they would run of liquidity. Because they would no longer lend to each other, it only made the sudden shortfall of liquidity even more dangerous, so this was a very necessary measure.

2. The fact that banks no longer lend each other money, and are instead hoarding lots of liquidity also has the important effect that it drastically lowers the actual amount of money in the system. In a situation such as this, even though the central bank has increased the amount of "printed" money, referred to as M0, the real amount of money in the system, which is actually being circulated, can still decrease, leading to deflation. We witnessed this phenomenon during the great depression, during which the government did not react in a meaningful manner in terms of monetary policy. So in the situation our government have found themselves in, lowering the interest rate and flooding the system with "cheap" liquidity was the only correct decision.

It is true that governments should slowly start easing off this policy in the near future, but timing is vital. Do it too quickly, and you risk a new collapse of the banking system, and make no mistake, many European banks are still in an absolutely terrible situation. Do it too slowly, and we risk massive inflation. It's a tightrope that has to be walked, but the central banks acted correctly given the situation, and can not be faulted for the increased amount of money that has been created, as the real amount of money hasn't changed very much at all.

The problem with this though was despite the printing presses running, banks still refused to lend, instead they only lent to hedge-funds, brokers and speculators. A disastrous consequence, as you said the interest rates are that low that it has lead to rampant speculation and no real economic growth. Here in the UK there's already another property bubble growing, whilst an increase in property prices has eluded the world into think the UK economy is on the rise, it is in fact built on a house of cards, no pun intended.

While yes, many EU banks are still in a fragile state, thats because the ECB has refused to run the printing presses and has instead pursued an avenue of buying their own debt back. It's taking a lot longer to produce some confidence in the markets but i believe it will result in better economic growth than QE. The problem with QE is economy's can get addicted to it, The Japanese have had QE running for well over a decade with no end in site.

flarty:

Fat_Hippo:
snip

The problem with this though was despite the printing presses running, banks still refused to lend, instead they only lent to hedge-funds, brokers and speculators. A disastrous consequence, as you said the interest rates are that low that it has lead to rampant speculation and no real economic growth. Here in the UK there's already another property bubble growing, whilst an increase in property prices has eluded the world into think the UK economy is on the rise, it is in fact built on a house of cards, no pun intended.

While yes, many EU banks are still in a fragile state, thats because the ECB has refused to run the printing presses and has instead pursued an avenue of buying their own debt back. It's taking a lot longer to produce some confidence in the markets but i believe it will result in better economic growth than QE. The problem with QE is economy's can get addicted to it, The Japanese have had QE running for well over a decade with no end in site.

You are quite right in your assessment that bubbles such as the one in the UK real estate market are definitely a problem. What I fail to see is how adopting the bitcoin could actually solve any of these problems. Sure, the current system isn't perfect, but our current problems are essentially a result of a poorly thought-out currency union in the form of the Euro, and a bunch of fiscally-irresponsible and generally incompetent member states, but it's not as if the bitcoin would solve that problem in any way. In fact, I'm still not sure WHICH problem exactly the bitcoin is supposed to be able to solve, when the lack of a central bank only makes it more susceptible to speculation than any government currency.

Fat_Hippo:

flarty:

Fat_Hippo:
snip

The problem with this though was despite the printing presses running, banks still refused to lend, instead they only lent to hedge-funds, brokers and speculators. A disastrous consequence, as you said the interest rates are that low that it has lead to rampant speculation and no real economic growth. Here in the UK there's already another property bubble growing, whilst an increase in property prices has eluded the world into think the UK economy is on the rise, it is in fact built on a house of cards, no pun intended.

While yes, many EU banks are still in a fragile state, thats because the ECB has refused to run the printing presses and has instead pursued an avenue of buying their own debt back. It's taking a lot longer to produce some confidence in the markets but i believe it will result in better economic growth than QE. The problem with QE is economy's can get addicted to it, The Japanese have had QE running for well over a decade with no end in site.

You are quite right in your assessment that bubbles such as the one in the UK real estate market are definitely a problem. What I fail to see is how adopting the bitcoin could actually solve any of these problems. Sure, the current system isn't perfect, but our current problems are essentially a result of a poorly thought-out currency union in the form of the Euro, and a bunch of fiscally-irresponsible and generally incompetent member states, but it's not as if the bitcoin would solve that problem in any way. In fact, I'm still not sure WHICH problem exactly the bitcoin is supposed to be able to solve, when the lack of a central bank only makes it more susceptible to speculation than any government currency.

Oh no I agree, bitcoin isn't the solution, but to say it isn't the solution is to admit their is a problem. We do need a monetary reform, as i said it's lead to the biggest debt the world has ever seen, advantage of the system by banks through fractional reserve lending which is basically fraud. Bitcoin is a great experiment, and if you look into the blockchain you might see the appeal of it, if implemented into a regulated currency it could solve the issue of fractional reserve lending, which is nothing more than trickle up economics.
As for the EU its a lot more complicated picture, so many economy's housed under one currency yet all in charge of there own taxation etc. I'm no ukip supporter, but i just see the euro as a straight jacket when trouble hits.

flarty:

Oh no I agree, bitcoin isn't the solution, but to say it isn't the solution is to admit their is a problem. We do need a monetary reform, as i said it's lead to the biggest debt the world has ever seen, advantage of the system by banks through fractional reserve lending which is basically fraud. Bitcoin is a great experiment, and if you look into the blockchain you might see the appeal of it, if implemented into a regulated currency it could solve the issue of fractional reserve lending, which is nothing more than trickle up economics.
As for the EU its a lot more complicated picture, so many economy's housed under one currency yet all in charge of there own taxation etc. I'm no ukip supporter, but i just see the euro as a straight jacket when trouble hits.

Ha, well I have no issue with the bitcoin as a thought experiment, but many seem to genuinely believe in it as the currency of the future, which baffles me to no end.

I personally do not understand your problem with fractional reserve lending, as it is the very basis of the banking model, and without it they would no longer be able to fulfill the economically important function of bringing the capital of private savings into the hands of those seeking this capital to invest into business ventures, with the bank functioning as an intermediary. Again, much can be criticized about the practices of banks, but they are an important motor for growth nonetheless, and hindering their ability to function in such a drastic manner would be not be to anyones benefit in the long run.

Fat_Hippo:

flarty:

Oh no I agree, bitcoin isn't the solution, but to say it isn't the solution is to admit their is a problem. We do need a monetary reform, as i said it's lead to the biggest debt the world has ever seen, advantage of the system by banks through fractional reserve lending which is basically fraud. Bitcoin is a great experiment, and if you look into the blockchain you might see the appeal of it, if implemented into a regulated currency it could solve the issue of fractional reserve lending, which is nothing more than trickle up economics.
As for the EU its a lot more complicated picture, so many economy's housed under one currency yet all in charge of there own taxation etc. I'm no ukip supporter, but i just see the euro as a straight jacket when trouble hits.

Ha, well I have no issue with the bitcoin as a thought experiment, but many seem to genuinely believe in it as the currency of the future, which baffles me to no end.

I personally do not understand your problem with fractional reserve lending, as it is the very basis of the banking model, and without it they would no longer be able to fulfill the economically important function of bringing the capital of private savings into the hands of those seeking this capital to invest into business ventures, with the bank functioning as an intermediary. Again, much can be criticized about the practices of banks, but they are an important motor for growth nonetheless, and hindering their ability to function in such a drastic manner would be not be to anyones benefit in the long run.

If growth is you're only concern then fractional reserve lending is great in theory. But if you consider the wider implications of it then you start to see it as detrimental. Banks are undemocratic institution that only answer to themselves, to allow them the power to conjure money out of thin air, then basically decide where to funnel it is a disaster that has already happened. Banks acted out of self interest and greed in the sub prime mortgage fiasco, and we are still feeling the effects of it today. With a housing bubble in the UK, record low 2 year mortgage rates, and higher unsecured debt than before the credit crunch, they are back to acting out of self interest and greed. I don't believe they can be trusted with the power of fractional reserve lending, it's away of making free money as far as they are concerned. They basically list the loan as an asset on a different ledger, be it secured against a house, or against the person who has taken it out in the first place then just collect the interest. The real way to increase stable and strong economic growth would be to raise wages so people weren't dependent on borrowing in the first place. This way you would create a stronger and bigger middle class, that drives demand for goods and services, thus creating more jobs, leading to more profits. Instead of just having an indebted working class that could fall behind on repayments.

In a gold rush, the money is in selling shovels. Bitcoin might have been viable under different circumstances, but from the beginning it was used for little more than illegal transactions and money laundering and now it is nothing more than a commodity that people think is valuable, and that charlatans lie about for their own gain.

Currency 101 is that currency is whatever people will put faith in, anything someone will take for goods and services. Gold has little inherent value. It's rare and shiny and it has a few industrial uses, but in the end it's fundamentally no different from the dreaded "fiat" currency to most people. We're arbitrarily deciding something has value. Ancient cultures mostly used it because it couldn't be easily duplicated. You can't use rocks as currency because anyone could pick one up off the ground. The mines were controlled by the states and coins were coined to ensure that money could be controlled.

All reinstating a metal-backed currency would guarantee now is hyprt-deflation. A currency with a stable value is not really what you want, you want one that can be controlled and can change as needed. Bitcoin was doomed to fail because it didn't have the faith of a large body like a government that could protect it, and unlike gold which might still hold some value in a hypothetical societal collapse (if for no other reason than people think it's valuable), Bitcoin has no such security.

Bitcoin has never seemed like a good idea to me.

An interesting experiment I grant, but in terms of using it as real money? It's never sat right with me.

Why is this news? Bitcoin has always fluctuated wildly. It will probably fall some more, then it will rise, then it will fall, then it will rise, then maybe it will remain steady, then it might rise again, then maybe fall some more ...

Are we going to start singing a requiem for the sun every time it sets in case it's the last we ever see of it?

flarty:

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics

That's basically what happens with the currency in use now ever since the gold standard was removed.

Alexander Kirby:
to it so that other users can eventually make more of it out of... nothing?? But seriously you expect to be able to make money just pop into existence all without actually contributing anything of value back to the world.

That's what banks do through fractional reserve lending.

The benefit of bitcoin is the number of them that can ever be produced is limited. As time goes on less can be mined and eventually a limit will be reached, this is why the gold standard was used for so long.

Deflation is not a benefit. The ability for a sovereign state to control their own money supply *is* (see: numerous debates on how Greece being tied to the Euro was hampering its ability to manage sovereign debt).

Fractional reserve banking is also a product of timing differences, rather than "money creation" - people need money at different points in time (I may need to pay a bill on Thursday, but only get paid Friday), and rather than do direct person-to-person transactions it's easier to say "I'm not using this currency at the moment - someone else can make transactions with it until I do" and deposit it in a financial institution. It's just an accounting convenience (i.e. not transferring money from "Cash" to "Accounts Receivable" on your balance sheet every time the bank lends out "your" money).

flarty:
The other benefit is the blockchain, which is a ledger that records all transactions of bitcoin is recorded so it is known how much is in the system at all time, thus removing any chance of fraud within the bitcoin system.

It technically removes any chance of fraud by the payer. The person providing the goods and services can fraud it up however they like, and unlike banks or credit cards there is no "charge back" or other mechanism to recover your money once you have transferred it

(Also, there have been documented forks in the Bitcoin system where the protocol HAS allowed Bitcoins to be created wholesale).

The blockchain itself, which is required to be downloaded by any mining client, is growing at a current rate of ~1.5gb/month and is currently at 27.2GB. However, this low rate of increase is due to the system limitation that prevents any kind of scalability - it can only process 7 transactions per second. By comparison Visa handles on average 2000 transactions per second. So in addition to Bitcoin not being capable of acting as a global currency due to this transaction bottleneck, if this bottleneck were removed and the Bitcoin protocol upgraded to handle the same amount of transactions that Visa does currently the blockchain would grow at a rate of 430gb per month.

This is also the factor that gives lie to the "Instant Payment/No Fees" theoretical benefit of bitcoin - if you want your transaction to be processed in a hurry you have to pay miners fees, which is essentially a bribe to those with mining clients to jump you to the head of the queue... or you can wait potentially days for the transfer to occur. Many people are fine to accept the transaction log as proof that the bitcoin will eventually be transferred into their wallet and act financially as if this is already the case - submitting orders for other goods and services that are required to be paid after the initial bitcoin transfer would complete. It's almost like they are borrowing "money" while it still technically belongs to another person... let's think of a name for it, maybe "fractionalpartial reservefunds bankingtransactions".

Incidentally, delays are one of the reasons behind the collapse of certain Bitcoin exchanges - the transaction would be submitted for peer-to-peer approval, but the fraudulent party would change their ID at the last instant before the transaction was entered into the blockchain. The fraudster would contact the exchange, stating that the transaction with the initially submitted ID had not occurred (which the Exchange would validate by checking the blockchain - yup, no transaction with the previously agreed ID) and could the exchange please make another transaction?

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing??

To be fair, governments do it all the time.

Depending on how low it goes I might buy a few just for the novelty. How easy is it to purchase/sell the coins? Has anyone actually made money buying and selling them like stock?

How is this news? The bit coin's value Rises and falls more often than a guy on a trampoline.

Westaway:
Depending on how low it goes I might buy a few just for the novelty. How easy is it to purchase/sell the coins? Has anyone actually made money buying and selling them like stock?

Plenty of people have made money based on buying low and selling high - a lot of the time though, this "money" is the value of the accounts held (i.e. the exchange credits accounts with either "Bitcoin" or "Other Currency"). WITHDRAWING the "other currency" from those accounts however, often involves delays and often transaction size limits (and often will be flagged as suspicious transactions by 3rd party remittance services used by the exchange to transfer from their bank accounts to yours).

Dealing with individuals is also possible, selling your BTC for USD on Craiglist or similar for example, but often these individuals will attempt to pay in non-cash assets. There's an example on Buttcoin of a guy who discovered he had thousands of USD worth of BTC after having played around with mining clients a few years ago and tried to cash out - and meeting with people in diners who tried to offer bags of unvalidated Amazon vouchers instead of cash.

BTC ATMs also exist, but as the Mythbusters team found when they tried to see how easy it was to buy/sell BTC from an ATM, it takes days to process(during which time they lost a fair amount of money from the volatility of BTC in addition to the transaction fees).

You can "buy" things with BTC from a selection of stores (like Overstock) instead, but typically what happens is that the store doesn't actually accept BTC and you're actually paying a 3rd party exchange who then credits USD (or other sovereign currency) to the store's accounts. Someone actually bought a 6-figure sportscar this way, but it's relatively rare.

Fox12:

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing??

To be fair, governments do it all the time.

I'm pretty sure that governments don't do it all the time.
How often has the US made a new currency from scratch? The UK decimalised the pound in 1971, but haven't really changed anything since then. They certainly didn't create a new currency. Can you name a country which has made new currencies 'all the time?' because I'm really trying hard to think of a nation which has.

Westaway:
Depending on how low it goes I might buy a few just for the novelty. How easy is it to purchase/sell the coins? Has anyone actually made money buying and selling them like stock?

A few. Some people managed to buy in when they were under a dollar and then sell basically whenever for stupid profits.

However, almost everyone ended up losing money.

Good. bitcoins were overvalued and inflated by speculators, now its dropping down closer to what its actual value should be. and hopefully it also scares some speculators away so they can leave it alone and go ruin somone elses business.

FalloutJack:
Well, look at that. The guy on Youtube with the playlist about the failure of bitcoin was right. Call me unsurprised. And hey, why not? Ya know what it is? Digital fraud and counterfeitting, the systematic creation of fake money to swindle others out of their real currency.

removing overvaluation is hardly a failure. quite the opposite.

Alexander Kirby:
So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing??

congratulations. you just described USD, EUR, JPY, ect.

now, how about bitcoin?

hentropy:
In a gold rush, the money is in selling shovels. Bitcoin might have been viable under different circumstances, but from the beginning it was used for little more than illegal transactions and money laundering and now it is nothing more than a commodity that people think is valuable, and that charlatans lie about for their own gain.

research estimates that less thna 3% of bitcoins were used for illegal activity. so hardly the majority.

FirstNameLastName:
Why is this news? Bitcoin has always fluctuated wildly. It will probably fall some more, then it will rise, then it will fall, then it will rise, then maybe it will remain steady, then it might rise again, then maybe fall some more ...

Are we going to start singing a requiem for the sun every time it sets in case it's the last we ever see of it?

some people really really really want it to fail for some reason.

Korskarn:

Deflation is not a benefit. The ability for a sovereign state to control their own money supply *is* (see: numerous debates on how Greece being tied to the Euro was hampering its ability to manage sovereign debt).

The problem in greece wasnt inability to manage sovereign debt, but the debt fraud commited during introduction of euro that lead to the debt being uncontrollable. they basically fucked themselves 10 years in advance.

Li Mu:

I'm pretty sure that governments don't do it all the time.
How often has the US made a new currency from scratch? The UK decimalised the pound in 1971, but haven't really changed anything since then. They certainly didn't create a new currency. Can you name a country which has made new currencies 'all the time?' because I'm really trying hard to think of a nation which has.

plenty of ex-soviet block countries did. also while yes, bitcoin is younger than USD, who is to say it cat go on for 200 years without reforming and then claim something else new is "just changed". all currencies were created at some point.

flarty:
snip

I never said I liked the way fiat currency works any more. Bitcoin is just one that exaggerates all the problems with how our money currently works.

Fox12:

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing??

To be fair, governments do it all the time.

To be honest I don't like the way our official money works either. Sure, I'm no economist or market analyst but that's maybe why I can see the problems with it all in the first place. There may be a very good reason why the money I'm holding right now will be worth different amounts to people depending on where they live and what day it is, but that doesn't mean it should be like that. If money is supposed to be a universal bartering good, why is it that its value fluctuates all the time?

Alexander Kirby:

To be honest I don't like the way our official money works either. Sure, I'm no economist or market analyst but that's maybe why I can see the problems with it all in the first place. There may be a very good reason why the money I'm holding right now will be worth different amounts to people depending on where they live and what day it is, but that doesn't mean it should be like that. If money is supposed to be a universal bartering good, why is it that its value fluctuates all the time?

Money derives it position as a universal bartering good not because it's value is fixed, but because it is nearly universally accepted. Name a single trade transaction that you made that would not have accepted some form of legal tender.

Furthermore, you cannot pay your federal taxes in any form other than US Dollars. You cannot hand the IRS bitcoin, gold, cellphone minutes or cows. That is the main difference between bitcoin and a national fiat currency.

Alexander Kirby:
If money is supposed to be a universal bartering good, why is it that its value fluctuates all the time?

Most fiat currencies - especially the big ones - really don't fluctuate very much at all. Inflation rates add up over time, sure, but they're only a few percent, and they don't move that much. Certainly not compared to gold, or oil, or Bitcoin, or any other commodity you'd care to name.

It's not even theoretically possible to create an invariant value. All goods are in constant flux.

Alexander Kirby:

Fox12:

Alexander Kirby:
I just can't fathom how bitcoin could possibly work to begin with. So someone just decided one day "hey, I should make a currency" and then assigned some arbitrary mathematics to it so that other users can eventually make more of it out of... nothing??

To be fair, governments do it all the time.

To be honest I don't like the way our official money works either. Sure, I'm no economist or market analyst but that's maybe why I can see the problems with it all in the first place. There may be a very good reason why the money I'm holding right now will be worth different amounts to people depending on where they live and what day it is, but that doesn't mean it should be like that. If money is supposed to be a universal bartering good, why is it that its value fluctuates all the time?

Oh, I certainly agree. I would prefer to have something more concrete in my hands, personally. Of course, there are reasons that we do this, and sometimes we self inflate on purpose. For instance, if you owe a million dollars, and you inflate the value of the money, then it's worth less, but you still owe a million dollars. You pay less than you borrowed. Personally, I think our system of money is incredibly stupid. I'm no eceonomist, but the more I learn the more I realize how stupid our monetary system. There ARE alternatives available, after all.

Fox12:

Oh, I certainly agree. I would prefer to have something more concrete in my hands, personally. Of course, there are reasons that we do this, and sometimes we self inflate on purpose. For instance, if you owe a million dollars, and you inflate the value of the money, then it's worth less, but you still owe a million dollars. You pay less than you borrowed. Personally, I think our system of money is incredibly stupid. I'm no economist, but the more I learn the more I realize how stupid our monetary system. There ARE alternatives available, after all.

Ever heard of supply and demand. The price goes up when people are buying and drop when they are selling. Take Russia, due to mix of sanctions and the oil price drop its currency has tanked. People are taking the rational decision to get their money out of the country, so the currency drops. The capital outflow from Russia last year was something like $48 billion, so that going to have a real effect on its value.

In general the price goes up down according to economic data about that country. If the data is good the price goes up and if the data is bad its goes down.

Strazdas:
Heh

Ah, we've been through this song and dance before. You have an opinion on the matter, but it just doesn't follow.

And now, for Bitcoin's personal enjoyment...

TheSYLOH:
-snip-

I'm glad you brought up cows because I nearly included them in my previous comment. My point was going to be that it's silly that the value of a currency should change, because that's exactly what it shouldn't be doing. The reason using cows to barter doesn't work is because they're not worth the same to everyone; not everyone needs a cow. So instead of trading your cow directly to the owner of that swish looking Sega Game Gear™, you sell it to a farmer for something that is worth the same to the owner of the Game Gear™ as the cow was to the farmer. The fact that the farmer was from Zimbabwe shouldn't affect my ability to barter for the French Game Gear™.

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