Monday, February 10, 2014

Bitcoin Flash Crashes, Drops By 80% In Seconds

Tyler Durden writes:

Now that Bitcoin exchange Mt.Gox has terminally discredited itself following the latest, and likely last, withdrawalhalt announced late last week which sent the value of Bitcoin tumbling by 25%, Bitcoin traders are left with just two exchange options on which to transact: BTC-e and Bitstamp. And for those using the former to buy and sell the virtual digital currency, things went from bad to worse a few short hours ago, when Bitcoin had its very own "Waddell and Reed" moment, when the price of Bitcoin cratered by over 80% in the span of seconds, after a modest block of just under 6000 Bitcoins sent the price plunging from over $600 to $102.
However, market gymnastics may just be the tip of the iceberg - a far bigger issue, one we have been warning about since the last March surge in Bitcoin's dollar price, is that the crackdown on Bitcoin both in the US (see "Miami Bitcoin Arrests May Be First State Prosecution"), and around the world (in Russia Bitcoin was just declared illegal) is finally heating up. It's only going to get worse in an insolvent world desperate to halt money laundering.
And since digital currency advocates have finally realized they can't hold the electronic 1s and 0s in their hand in a worst case scenario, the biggest winner of the latest Bitcoin crash is none other than the real alternative currency (in Paul Singer's words), gold, which moments ago just hit a one month high and rising.

10 comments:

  1. This shows one difference between Bitcoin and the Ponzi schemes to which it is often mistakenly compared. A Ponzi scheme that drops 80% does not recover to near it's previous level in seconds. The Bitcon market may be manipulated, but try to find a major market that isn't, including gold, stocks and bonds.

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  2. Tyler Durden writes:

    "And since digital currency advocates have finally realized they can't hold the electronic 1s and 0s in their hand in a worst case scenario..."

    My response:

    Of course you can. It's called a paper wallet. But the fact that you can store it in your brain is even better.

    If Tyler and I have to make a run for the border he will likely be relieved of his gold and silver if he tries to take them with him. Meanwhile, I can cross borders easily avoiding capital controls and then tap into my brain wallet on demand. It's not a question of "either, or". Both metals and cryptocurrencies have their pros and cons. Why limit yourself to just one?

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  3. BTW, this "flash crash" was likely some fool who hit the wrong button or panic sold a large chunk of coins. Notice we also had a "flash rebound" right after the fact.

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    Replies
    1. Do you even acknowledge the possibility that Bitcoin could go to zero?

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    2. @Anonymous February 10, 2014 at 2:12 PM

      Possible? Yes. Probable? No.

      Delete
    3. Possible? Yes. Probable? Yes. Buy GOLD which will NEVER "go to zero."

      Delete
  4. Alex Daley at Casey Research delivers the best critique I have ever seen of Bitcoin. This is not the revolution you are looking for.

    http://www.caseyresearch.com/cdd/failure-to-understand-bitcoin-could-cost-investors-billions

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    1. @ Anders Aronsson February 10, 2014 at 1:44 PM

      Alex Daley is actually making an argument for central bankers and centralized monetary management. He sounds like a Keynesian to me. Many of the "faults" he points out sound like features and benefits and the others have been addressed many times and in many places before.

      Alex is actually the one who fails to understand bitcoin. He is right that bitcoin is not a pancea but, like any other tool, it does many things well and many people value those things.

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  5. Seems the only people who don't "understand bitcoin" are the people that keep defending shitcoins. Sound the Death March. I hope you've been buying gold like I've been saying all this time. You'll never see gold drop that low. Gold is going to rise the more The Fed inflates. Don't waste your time or $ on shitcoins.

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  6. I hope it will happen at any time and it maybe increase with huge number of values.

    Bitstamp

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