Wednesday, January 14, 2015

Bitcoin Collapse Continues; Breaks Under $200

As I write, the price of Bitcoin is down another 25.16%, in the last few hours, to $169.91. Just yesterday,  the price broke below $250.00.

As I have noted, what we are seeing here is an exhaustion in buying. The initial Bitcoin fanboy base consisted of some techies and some libertarians, after that crowd was "all in,' pushing the price over $1,000, new buying, which is required to keep these type climbs going, was simply exhausted.

There may be some occasional dead cat bounces. but the price of Bitcoin is in an extended freefall.

I have received some comments comparing the Bitcoin collapse with various commodity and interest rate forecasts. Exact price forecasts are always difficult, but what we are seeing with Bitcoin is not simply an incorrect price timing forecast, it is a collapse in Bitcoin, that has no consumer underpinning to stop the crash. Gold, oil and other commodities may have their ups and downs, but these prices have underlying consumer demand which means their prices will never go to zero, or anywhere near it. Bitcoin is a completely different animal, no one uses Bitcoin in jewelry, the way gold users use gold. No one use Bitcoin to fill an automobile tank, the way oil consumers use oil.. Bitcoin has no such "intrinsic" value, thus their is nothing from the consumer demand side that will necessarily stop its falls. It is really about how many Bitcoin fanboys are left, who want to take one more buying plunge into the market. They may push the price up from time to time, but it is very difficult to see how that buying will be enough to support the price long term.

In the end, it appears that Bitcoin has failed to interest most actors in the economy and a plunging price like we are now witnessing is surely not going to entice them anytime in the near future.


  1. this is not the first time this has happened to btc and it will not be the last, btc is a long game, it may be overpriced at the moment, but there is value there, and as the current paradigm falls apart as it inevitably will there will be demand once more.
    a few years ago $169 was a pipe dream for btc.

  2. I can't believe this!

    I thought all those high powered computers doing calculations made Bitcoin worth something.

    What was the argument? "Energy can't be destroyed." or something along those lines?

    Let's go to geek speak, shall we?


    I can haz a Bitcoin cheezeburger?

    All your Bitcoin belong to us!

  3. RW, define near future please.

    1. At the current rate we will see it below $100 SOON - as in within 48 hours
      Then within a week LOW double digits - then the losers will SCREAM BUY and it will linger
      there for a few months as miners and exchanges go dark and the only participants will be the bagholders who will find that they cannot even use the thing

  4. They kept saying "There's nothing stopping bitcoin!..." but left out the "from going to zero"

  5. You think the price of gold is explained by its "underlying consumer demand"?? ie gold at $1200 is explained by jewelry and gold teeth? LOL!

  6. Your economic reasoning when it comes to the consumer demand of gold and oil is wrong. Bitcoin's prime function is as a store of value and if that fails then it will go to zero. That is NO different than gold. If people stop seeing gold as a store of value -- because it loss its scarcity -- then gold prices would crash. Not just for it as a store of value but as a commodity as well. The price gold is valued at for jewelery and other applications is because of how scarce it is. If gold lost its scarcity, it would be put on a path towards $0.

    There is no difference between gold, oil or bitcoin. This arbitrary difference you make between the former and later is pure voodoo.

  7. "Bitcoin has no intrinsic value" There'll always be a demand from merchants to escape high credit card fees. Bitcoin itself may not outlive its creator but the principle is definitely here to stay. I think bitcoin itself is much more like an experiment. After trial and errors and lots of VC money, there'll be in 5-10 or 20 years a whole new payment system that will revolutionize transactions mediums. Bitcoin isn't stupid, people hodling in hope to make a quick buck are.

  8. Yes bitcoin fell from 1000 to 200, but that's cherry picking indeed. It's akin to say do not invest in stock market because it crashed from 2007 to 2009; that's stupid and completly misses the fact that the stock market rose 1000-fold between 1900 and today. Few years ago you could exchange a pizza for 10,000BTC. Nobody knew it back then but this was the most expensive pizza in human history.

    1. "It's akin to say do not invest in stock market because it crashed from 2007 to 2009; that's stupid and completly misses the fact that the stock market rose 1000-fold between 1900 and today. "

      Why the suggestive anonymous prognostications? Put your balls out there like RW and tell us where Bitcoin will be a year from now.

      Otherwise, stop bitching about the "cherry picking" when all he's doing now is reporting the facts.

  9. RW puts quotes around "intrinsic" value for a reason. Under Austrian theory, there is no such exact thing as intrinsic value and I believe, definitely not something like a "store of value." Value is always and only a subjective desire of each individual actor. It cannot be "stored" in anything nor is it intrinsic to anything. A more accurate description for gold and oil might be "inherent usefulness" or that they have practical features that have made them almost universally subjectively valued over a long time, or that because of their nature they are subjectively valued as a medium of exchange in addition to the other reasons they are valued. As far as "storing value," that can be said of almost anything, like a house. It's used more often for gold than houses because gold is more readily exchangeable, not because its a better container in which value can be stored.