For anyone who has been under a rock or in a cabin in Canada or something for the past thirty-six hours, the price of Bitcoins has crumbled. After hitting a high of 266 filthy fiat dollars per tulip bulb, the price crumpled as thousands of people stepped back and realized they’d made a terrible mistake. The resulting selloff once more devastated the Magic: the Gathering Online eXchange‘s servers, pushing the lag up to over an hour, allowing us to watch the price topple down the charts like distant starlight reaching the Earth for the first time in millennia. It finally settled at a low of $105 before jumping back up to $200, then back down, then up, then down, up and down like a yo-yo. Relatively smarter people and panic sellers got out, while the true believers rode it all the way down, despite their losses.
MtGOX finally admitted that they were not being DDoSed, instead announcing that they are merely incompetent and unprepared for actual web and exchange traffic. They then pulled the brakes and halted all trading entirely to let the market “cool down” following the price crashing.
Meanwhile, trading continued at smaller exchanges, with the prices falling well below $100 as wary “investors” jump ship. Many of them have experienced their own issues from the flood of traffic, with Bitfloor crying
What drove this ridiculously huge bubble? If you ask the average bitcoin chump, he’ll tell you that the citizens of Cyprus are buying up huge amounts of bitcoins to hide from their government’s “theft” as the country tries desperately to save its flailing economy. Amazing bitcoin ATMs and fantastic new bitcoin services are springing up all over the country, as well as everywhere else in Europe. None of this is true, however. Cyprus is involved, but not in the way that everyone is trumpeting. Bitcoiners saw the crisis in Cyprus and attempted to pitch their flaky “currency” to Cypriots as a way to escape government controls, hype built up around this, media attention built up around the hype, and then this all began feeding back on itself until yesterday’s reality check.
Today, prominent posts in the bitcoin subreddit included links to suicide helplines, angry screeds about MtGOX, people calling each other out for giving bad financial advice, and the occasional smuglord showing off that he’s still hoarding his buttcoins. The atmosphere there is rather deflated. Bitcointalk just wants MtGOX’s blood.
Who’s left holding the bag this time? Everybody who was gambling on the price going up uP UP forever, all the true believers who’ve been led astray by the likes of Rickard Falkvinge, Max Keiser, and Alex Jones, foolish investors who read about this newfangled “bitcoin” thing in shitty financial rags, and the Winklevoss twins¬†(notable for such aptly named websites as “Hukkster” and “SumZero.”)
MtGOX is set to reopen tonight at 2:00 UTC (9:00 PM EDT, 7:00 PDT) to allow the crash and thefts to resume.
Update: MtGOX lasted an hour and a half before it collapsed beneath its own weight once more.
For those not in the know, the Magic: the Gathering Online eXchange (MtGOX for short, emptygox to some) is the largest and most popular bitcoin “exchange,” a service that matches fools wishing to buy bitcoins with those who are just a bit wiser and are trying to get out. It’s somewhat similar to real stock exchanges, except it focuses on only one thing, does a terrible job trading, and was originally intended to exchange virtual Magic: the Gathering cards.¬†MtGOX theoretically matches buyers and sellers, then takes a fee for each transaction, then apparently throws that away instead of spending it on maintenance, infrastructure, or administration. The site is notoriously laggy, has been hacked, DDoSed (if its admins are to be believed,) and appears at most times to be held together by twine.
Despite all of this, MtGOX has prevailed and is widely used to buy and sell what amounts to Chuck E. Cheese tokens. Recently, the price has risen meteorically and is skirting USD 200 (let’s face it, nobody cares about other currencies) at the moment, though it’s oscillating wildly enough to produce a tone. MtGOX has been the primary arbiter of this “value” throughout the entire wild ride, but some things are starting to seem more and more suspicious. The lag in transaction times on MtGOX is infamous now, so much so that the official bitcoin IRC channel has a bot command that posts the lag in seconds and the distance traveled from the sun (measured in Astronomical Units) during that time. Typically during large selloffs and other market scares, the lag reaches ten to fifteen minutes, during which time light from the sun reaches Earth or beyond. The big-boy stock exchanges spend fortunes to optimize their connections to shave milliseconds off of their transaction times while MtGOX is running on hamster wheel power. The lag is normally manageable, but during panic selloffs, it kicks in quickly, acting as a brake and halting any potential crashes, easing off when buying appears to be in vogue again. This isn’t nearly as great an issue when people are in a buying frenzy, despite what bitcoiners would have you believe. The lag is blamed on numerous things including high volume trading (this is possible,) a poorly coded backend (this is absolutely true,) and DDoS attacks (this is bunk.) Some also wonder if it’s not intentionally instated, acting as an emergency brake to keep the price up, keeping people trading and keeping MtGOX in business. During the last price drop, the site was actually taken offline, halting the crash (and any potential purchases) entirely.
While the lag is the most glaring and obvious issue, there are other, less noticeable problems that pop up repeatedly. Selling and buying follows an odd pattern of large sales, after which the price drops (or plummets, as is often the case,) and then numerous (sometimes dozens or more) small purchases appear, each incrementally increasing the price until it’s recovered a bit. This isn’t to say MtGOX is doing this though, as it could be easily explained by high-frequency trading (at least as high a frequency as five to ten minutes of delay allows) bots kicking in at certain price points to push the “value” up and avoid losses. The sudden flurry of activity from such an event could also explain the lag and accusations of DDoS.
Further complicating the lag, trading problems, and general unusability is the expected incompetence of a bitcoiner-run “business” and its infrastructure. MtGOX claims to rake in several tens of thousands of dollars in profits per day, but apparently has invested none of this into more capable hardware or more efficient code. Seeing as it has the dominant market share over all the other bitcoin exchanges, it has no incentive to improve. Their profits are based primarily on trade volume, so the more they let through (especially when people are buying in and driving the price up,) the more they make. Seeing as their fees are percentage-based, it makes perfect sense for them to prop up the price, maximizing profits.
Another odd thing that’s been noticed time and time again are the fake buy and sell walls. These used to be much more common and obvious, especially during flash crashes, as they’d vanish immediately upon being reached, but are seen less frequently now that the lag more effectively controls crashes.
Lastly, but hopefully the least likely, the MtGOX admins could be directly manipulating the prices, pushing them further and further up during periods of wild speculation, once more in order to maximize profits based on per-transaction fees. There is no evidence of this in particular, but with no one reputable auditing their practices and no proper regulation, this can’t be entirely ruled out. Until MtGOX either somehow fails catastrophically, runs off with bitcoins, or proves otherwise, it’s best to hold them under suspicion of butt market fuckery and manipulation.
Note: During the writing of this article, MtGOX pulled the plug yet again to stop a small crash. Someone sold 5,000 coins and the price dropped by $10 USD instantaneously.
Today Bitcoins hit $88 (and went up and then down and then up again) which is an important milestone because it allowed me to write this witty title.
I think we’ll probably hit over $100 by the end of the week or mid next week. My opinion is that we’ll see a little over $100-$120 before the crash comes again, but I’m terrible at predicting these things.
So instead I’ll post these 4 simple signs that you’re investing in a bubble.
There are four signs that can help you recognize that an investment is probably in a bubble:
1. Skyrocketing Price
One of the major signs that an investment is headed into bubble territory is a skyrocketing price. The price might be shooting up quickly, seeing rapid appreciation. There doesn‚??t seem to be any cap on the price; it just keeps going higher.
2. A Great Deal of Hype Surrounds the Investment
While not every hyped investment is in a bubble, an investment that is surrounded by a lot of hype could very well be in a bubble. Everyone talked about buying a home, insisting that prices would rise, and that everyone should have a home. ‚??It‚??s an investment that always appreciates‚?Ě was a regular selling point.
3. Everyone Seems to Be Ignoring the Fundamentals
Is the only ‚??newsworthy‚?Ě thing about the investment its skyrocketing price? You might be in trouble. A focus almost entirely on the price action and little thought given to fundamentals could be the sign of a bubble.
4. This Time It‚??s Different
There was a time, just before the housing bubble burst, that some thought that we‚??d reached the end of true down cycles in real estate. ‚??Housing is different,‚?Ě was the refrain. This attitude prevails just before other bubbles burst as well. Somehow, proponents of the investment insist, there is something different about this investment, or there are special conditions that allow this asset to appreciate indefinitely.
How many signs can you spot today?
Grab your popcorn, bitcoin approaches $50 in the middle of a runaway expanding bubble and when it pops it’s going to get ugly.
EDIT: It’s crashing now, watch it live here.
If you haven’t heard, bitcoin¬†surpassed¬†it’s previous high of $32 and is very rapidly approaching $50. There really isn’t any reason for the rally over the past week or so besides Kim Dotcom saying he wants a bitcoin credit card for his illegal file sharing service and some dude from the Pirate Bay saying he expects Bitcoins to reach $100,000.
Look at this crazy graph that’s totally normal and sane for a stable currency.
This is not normal. THIS IS NOT NORMAL YOU IDIOTS.
Here’s the recent¬†bubble¬†overlaid over the last¬†bubble.
We’re a few days away from a repeat of the last crash, and it’s gonna be just as bad this time.
Remember when you were a kid, playing with Lego? And you tried to build a giant Lego tower, but you didn’t build a base for it, just stacked Lego on top of Lego until it was all¬†wobbly¬†and fell over.
Let’s look at the¬†volatility¬†over the past hour as bitcoin reaches it’s unsustainable peak and tumbles down.
Wild spikes of a dollar or more, this is the currency of the future folks.
So grab your popcorn folks, it’s about to get REAL good!
Bitcoins rise from $3 to $7 in the last month, are we looking at a zombie currency in the coming week?
Bitcoins seem to be slowly rising from their doledrums. In the last 30 days the price of bitcoins have rising, from nearly crashing below $3 before¬†slowly and steadily rising, just touching above $7 today. What’s going on, what’s driving this increase and what’s going on in the next week for bitcoins?
I have 3 theories myself:
1) People cashing out bitcoins after starting up school again. No time to devote to mining anymore, cash out and spend the cash on books and supplies. The price rise is normal buy-back from people still in the game.
2) Cashing out bitcoins for holiday spending. The end of the year cash crunch means that many people could be selling their bitcoins to buy Christmas presents. Price tanked around October though, which seems too early for that. Price increase was people buying back their coins.
3) Bitcoin is just being the¬†volatile¬†cunt it always is and who know why the fuck the price tanked.
Option 3 seems the most likely option. What’s interesting to watch out for is the upcoming episode of the hit CBS sandy-vagaina show “The Good Wife” – Bitcoin for Dummies. In fact, CBS just released a teaser trailer a couple days ago that should really get some interest in bitcoins going. Except it doesn’t mention bitcoins at all, and features that dirty fiat currency.
I think we’re going to get a flurry of interest in bitcoins next week when this episode finally airs, but is it going to do anything for bitcoins long term? Probably not. There’s going to be a bit of activity, either good or bad, but interest will wane quickly. The method for moving cash in and out to complicated, no merchants accepting bitcoins, and the bitcoin forums a bit too unfriendly. A currency that has risen from the dead, but wanders the earth aimlessly and with no purpose, feating on the flesh of news.
Should be an interesting next week.
Ars Technica had a great article on Bitcoin’s latest crash, and instead of reflecting on what this means to the community and the possible coming age of stability of the currency, they decided to tear down this website as being a shill for the Fed and accuse us of trolling Bitcoins and causing all the problems.
The jig is up guys, we better pack it in because we’re shills for the Fed, being paid in Mt. Dew and Bugels
Also, what’s up with that “penis” spoiler tag?
HAI GUYZ DO YOU LIKE WORTHLESS CURRENCY??
Bitcoins have dropped from a stable $4 to nearly $2 in less than 24 hours.
As of this writing, Bitcoins are actually a bit lower than this graph, around $2.25.
As you can see, Magic The Gathering Online eXchange promptly shit itself over the news and is sputtering useless graphs out. That graph looks rather fortelling.