A friend of mine bought about $2000 worth of Bitcoin a couple of weeks ago and (despite my advice to transfer it to his wallet) left it in his Mt. Gox account. A couple of days ago, the Bitcoin and his transaction history completely disappeared from his account. No response from Mt. Gox yet.
There have been numerous threads on the forum with titles like "MT GOX RIPPED ME OFF!!11" but every time the problem was dealt with quickly and pleasantly by MagicTux. He's very well respected in the Bitcoin community and I'm sure the MtGox team will do whatever they can to fix whatever went wrong. Clearly they're reached a new level of scale these last few weeks, so perhaps the latency of response has slowed.
Have you tried contacting them on the Bitcoin forum or IRC? Or perhaps send another email.
It would surprise me if Mt. Gox would maliciously manipulate accounts, as this would not make sense for them. Currently they own loads of money via transaction fees - why should they risk their monopoly status for some short term gains?
Perhaps because they think that there are only short-term gains to be had out of bitcoin? I'll take a hundred thousand real dollars now over a million bitcoins in 2013, thankyou very much.
MtGox has been fundamental to the whole pump-and-dump side of bitcoin so it wouldn't surprise me if they're manipulating the market.
one has to wonder what would happen if people with a complex knowledge of how these things work (market fluctuations and what not) decided to mess with Bitcoin.
What I mean is, investors can be twitchy, and susceptible to manipulation. It's sane to assume that people who invest in Bitcoin would be the same. Right now Bitcoin is new, so I doubt there's any sort of "Round Trip Trading" style activities going on, but should those types of speculators move in, could Bitcoin survive it? Especially since there's no laws protecting it.
It's worse than that - a single exchange, Mt. Gox, has 98% of the bitcoin trading volume. The exchange operator(s) have access to all information about orders placed - and also have bitcoin holdings themselves. The potential for manipulation here is unlimited. I do not mean to accuse them of anything - there is no information. But this is not a healthy situation, given, as others have said, absolutely no legal protection.
EDIT: I want to strengthen the statement that I'm not accusing the operator of manipulation. He's well-respected by bitcoin forum participants, and he is probably an upstanding guy. But in the world of finance, it is customary to have more than just that to guarantee the soundness of a central exchange.
Add to this the fact that Mt. Gox is taking deposits totaling in the millions of dollars without having any license to operate as a financial institution, and that it apparently hold around 10% of all existing bitcoins (someone traced a 470,000 bitcoin movement to a Mt. Gox account), and I have a strong feeling that this will soon end in tears.
There are some new exchanges that will probably take a share of the market. One of the more promising ones is tradehill.com. They offer a nicely polished interface, offer dwolla payments/withdrawls and have a "viral" component by giving a 10% rebate on fees for people singing up using a referral link. In addition, they charge less than mtgox.
p.s. I was told that posting a direct link is frowned upon and I understand that. But since not using a ref id will lead to a 10% penalty on fees, I feel bad not leaving one: TH-R11089
And does /that/ one have a license to take deposits? And is it backed by anything more than 4 stars next to someone's nic on the forum?
Bitcoins are a serious investment for some people now. They've put their savings into this. This is not just funny money. It's a lot of fun to play with, and I will keep doing that myself, but the people who are not just playing anymore have an immense potential to get hurt by these exchange swings.
By the way, I am nobody here on HN, but I do know that this is not the forum to post your affiliate links. My friendly advice would be to get rid of that.
If you're putting your savings into that it's your own risk. People know that right now Bitcoin should be regarded as completely volatile financial instrument. If you want to gamble: fine, but don't cry if it doesn't work out the way expected.
You are right in that Tradehill isn't necessarily 'better' or 'more secure' than mtgox. I just wanted to say that there are more exchanges coming up and that the situation will at least ease up in that direction.
As for the 'investment':
Honestly, the people that invested their savings into Bitcoins should be fully aware of the risk they're getting themselves into. As with everything that might give return your investments manyfold, there is a proportionally high risk.
I don't think it's a good idea to make large investments into Bitcoin unless somebody doesn't need the money and thinks the personal joy he gets out of gambling is worth it. I know I have a lot of fun with small amounts :)
As for the link, I'll remove the directly clickable one. But since signing up without a referal will lead to 10% higher fees, I'd at least leave the code for people that are interested. I was kind of uncertain but didn't find anything when skimming the FAQ or guidelines. I hope that is ok. (If not, somebody please respond and I'll kick that one too)
My point is that for something meant to be totally decentralized, bitcoin has become nearly completely centralized instead - virtually every transaction (even that buy-newegg one) has to pass through Mt. Gox, since suppliers have to be paid in dollars, and Mt. Gox is the only place with sufficient volume. I think that's an interesting and non-obvious outcome, and I wish that people would try to do a serious economic analysis of bitcoin, instead of giving us the standard opinions of "it's garbage" or "it's going to take over the world, you'll be poor and I'll be rich".
Even if there are 2 exchanges, or 5, or 10, that doesn't change the basic fact. After all, there are hundreds of central banks, but we don't refer to regular currency as peer-to-peer. My further point, as an aside, is that the shaky nature of the bitcoin exchanges makes this a dangerous investment for anyone who is treating this as more than an experiment. Failure of even one exchange out of several is still very damaging to an economy.
Mt. Gox might be the most popular one, but unless you're going to buy/sell an extremly high amount of Bitcoins, other exchanges are viable too.
Currently I like Bitmarket.eu most: This site acts as an escrow just for the Bitcoin side of the trade - the "real" money is directly transfered between buyer and seller (via bank transfer or Paypal). That's somewhat more distributed than other sites that act as "full gateways" between buyers and sellers.
Numbers are of the essence. That site has less than 1% of the volume of Mt. Gox, and Mt. Gox is considered too thinly traded for business transactions.
I don't see how the existence of that site, and trading over IRC channels, changes the fact that the bitcoin economy has become centered on Mt. Gox, and in the future, maybe, on several other exchanges. I never said that Mt. Gox is ALL there was.
BTW, I see the reasons that a proper exchange is more popular - there are 3 or 4 transactions an hour on bitmarket.eu, the escrow provisions are weak (as you said, it's for the bitcoin side only), the Paypal fees will be high on the small amounts traded, and trading higher amounts will get negative attention from Paypal - they will not let people trade virtual currency over their systems (and they consider bitcoin to be in that category).
Yeah, they take deposits. People have a dollar account and a bitcoin account on Mt. Gox. They may fund the dollar account with bank transfers, and they may fund the bitcoin account with bitcoin transfers. I don't know how long people tend to keep dollars on deposit there, but the total amounts are substantial. Apparently there is more than 470,000 bitcoins on deposit at Mt. Gox. That's $8 million at current prices. I am guessing that the amount of dollars is somewhere in the range of that - they've been doing $1.5 million in transactions a day, and most people probably take a few days to trade and then transfer the money out.
Of course, we can't be /sure/ of what they've got on deposit - it's not like they employ auditors, or publish reports, or submit to regulations regarding deposits. All that old economy stuff is for losers, y'know.
I know. My point is not so much about the possibility of front running, but about exchanges, and especially Mt. Gox, as the point of failure for bitcoin.
Let's face it, 99% of the excitement about bitcoin lately is not along the lines of "hey, this is a great use of peer-to-peer principles and a fascinating economic experiment with a decentralized currency". No, it is along the lines of "hey, this thing is making tons of money for people! fortunes out of next to nothing!". Take one look at the bitcoin forums.
A failure of a major exchange (and right now, there is exactly one major exchange) would damage the project severely. What's more, the focus on trading at exchanges is making the whole project look a lot less decentralized - yeah, the bitcoins themselves are peer-to-peer, but exchanges are sure not, and if what people really want to do is trade at exchanges, then that's what matters.
I absolutely agree, the bitcoins themselves can't be taken away and neither can person-to-person trade in them.
But you do agree that Mt. Gox sitting there with several million euros frozen in its accounts (for whatever reason) and with its bitcoin accounts inaccessible (even just for a while) will be pretty damaging to the project? And even more damaging to the people who, unlike, say, me, are NOT just playing or experimenting with this concept anymore? The pure person-to-person volume is tiny; if it could easily be scaled, then exchanges would not have arisen.
There's a huge difference between algorithmic trading (I think that's what you mean with "Round Trip Trading") and speculation and market manipulation. Traders usually profit from very short term market movements, and big volatility is usually catastrophic for automated algorithms (see e.g. 2010 Flash Crash). For the long-term investors, algorithmic traders are actually beneficial, acting as market makers, providing sufficient liquidity.
Also, I think that "no laws protecting it" is actually a good thing. Look at what happened to GBP when Soros went after it (another comment focuses on that...) - he earned huge amounts of money, and the UK Central Bank suffered huge losses. They also changed the currency regime to "no laws" to prevent such manipulation in the future.
I suppose I was thinking along the lines of: if a nation state, or group of nations, or banks - the kind of people who have a vested interest in devaluing bit coins - decided to attack the Market, what would happen? They would be free to use tehniques they can't use is real money markets, such as artificially inflating values ( via rtt) or misleading investors. Plus, they have large amounts of real money. Bit coins are a nice idea, but you can't buy a house with them. These are the kind of groups who have Pockets deep enough to invest enough to cOntrol bit coin, and also lose that investment in favour of longer term gains. And no matter how they do it, no one would have any meaningful legal recourse.
I think a little bit of manipulation did take place during the drop. I saw quite a few well crafted SELL!SELL! posts across various forums.
By well crafted, I mean, they were not obvious, they were designed to provoke response and negative discussion.
Some of those posts might have been genuine, some might have been work of pranksters (some pranksters were public in their desire to make fun of bitcoin market), and some might have been speculators hoping to buy in.
Not that it was much different from the BUY!BUY! manipulation in the runup previously.
Finally, most of the drop might have been just from someone cashing in their big position.
* How well do traditional laws hold up in this new distributed, de-centralized model. In particular, if bitcoin is to take off are protection laws (like traditional currency) necessary?
* How does Bitcoin's anonymity help or hurt such a legal protection? If people decide to mess with BTC will its anonymity come back to hurt it?
Advocates of Bitcoin portray its independence of state-sponsored currencies as a feature. Why should governments do anything to make Bitcoin safer to hold (even if they could)?
Then it becomes a question of whether any technological "patches" need to be made in order to prevent subversion of bitcoin's agenda, whether the courts and govt. get involved via punishing the manipulators, regulating or banning BTC, etc.
This is shaping up to be a highly risky pyramid scheme type deal. If you get in early and strong, you can expect a high payout, but the longer you hold on, the higher both the rewards AND the risk of a total bust.
Soros made his money because Bank of England was keeping the pound's value above where the market wanted it to be. (Soros being a large part of that market, but that's another issue.)
No government institution is going to be holding bitcoin's value anywhere. In a large, fully mature market, this wouldn't necessarily be a problem, because bitcoin would just trade at whatever its true value was. In a smaller market, especially an opaque one, it will be pretty easy to temporarily manipulate the price for fun and profit.
I'd be ready to chalk up this drop to a speculator, except I doubt the market is mature enough to support arrangements that would enable reliable short-selling. The run-up is definitely at least partially orchestrated, however, and not by the guys who write public blog posts titled "why I put all my savings in bitcoin."
I'm currently not really worried about the volatility, as Bitcoin turned out to be more stable than I expected for an essentially unregulated P2P currency.
Sure - it might be a somewhat bumpy ride at the beginning and some people might be too afraid to buy any substantial amount of Bitcoins. But for the future I hope that Bitcoin will be a viable alternative to today's payment systems used on the Internet.
I'm really puzzled how anyone expects to gain a foothold in a currency market with an instrument experiencing this type of volitiltiy. Popular currencies move fractions of a percentage per day. A 5600% swing is like financial base jumping.
Maybe I'm missing the point of bitcoin. I read through the Bitcoin FAQ and it sounds an aweful lot like they're trying to create a system where I can exchange my dollars for bitcoins and use them in transactions.
Am I wrong to be confused? Am I supposed to buy in to bitcoins with confidence, given the wild swings the currency is experiencing?
I'm not trying to take some random dig at bitcoin. My statement about their volatility is based in fact. I want to be educated on the matter. I find the idea fascinating, but it seems that providing stability should be a goal near the top of the list. Am I wrong about that?
You're not wrong to be confused. How anyone could transact for goods and services in such an extremely volatile currency is a mystery to me (assuming it remains as volatile as it has been).
Especially on the supply side. Let's say I'm running a coffee shop that takes orders in USD and in BTC. Let's say I want to sell a cup of coffee for $3 or 1 BTC. Or is it $3 or .0001 BTC? Or is it $3 or 1000 BTC? How do I, as a simple seller of goods and services in exchange for BTC, know how to price my items when they can be acquired via other currencies for relatively fixed prices, and huge arbitrage opportunities constantly exist?
A suggested "solution" is to post prices in USD but perform the transaction in BTC (based on the latest exchange rate) under the hood. This shifts the problem to the buyer, who doesn't know how much will be taken out of their wallet.
They had that system in Russia when the rouble was fluctuating more. All prices were posted in "comparative units", which were basically USD. You'd then pay using the day's exchange rate.
You could price the cost in USD, and use bitcoins only as a means of transferring wealth. People would pay an amount of bitcoins calculated dynamically from the market rate, and then you'd convert the bitcoins you receive into dollars as soon as the transaction was confirmed.
I suspect that we'll begin to see web services that handle this sort of conversion automatically. Give them a Dwolla account, and they'll provide you with a Bitcoin address that will automatically dump the equivalent market rate of dollars to your Dwolla account.
How fast does the market move? If someone buys my coffee based on the posted USD/BTC conversion rate as of 12:00:00, and I convert those back into dollars at 12:00:01, how much variance am I likely to see between the original USD price and the USD amount that I finally collect?
Any service that converted between BTC and USD would probably require at least 1 confirmation - i.e. it would take 10 minutes before the USD were sent to your account.
The market value could change in that time, perhaps by 10% or more when the market is unusually volatile. However, assuming that these rises and falls average out over the long term, a web service could guarantee the quoted rate.
So the user would buy the product using $20 worth of bitcoin, which would manifest itself as $20 (minus a percentage fee) in the merchant's account within 10 minutes. Any hit (or gain) due to fluctuating exchange rates would be taken by the web service sitting in the middle. Over time the fluctuations would average out - at least that would be the hope - or at least covered by the transaction charge.
I think the FAQ (and all the other "Bitcoin is a better Paypal" stuff) was written before the bubble started. At this point speculation has pretty much destroyed most of the interest in using Bitcoin as a payment system.
Then what does it become? That's an even bigger risk than volatility, isn't it? That the whole thing will just devolve to a giant market gambling pool?
Providing stability? I don't know how you can begin to do that for an asset whose fundamental value no one knows, not even remotely.
My recommendation: set up an order on Mt. Gox for some amount you'd be willing to pay, like $12 or $13, and leave it there. The way things are going, odds are the price will come back down to that range sooner or later. Of course, I could be wrong. On the other hand, it could drop even further than that; the $12 or $13 number is just based on the recent history.
I have a hard time believing the intrinsic value of anything is zero.
A bitcoin is list of signed transactions that is encoded within a chain of blocks verified by a proof of work. A list of transactions is only considered a valid bitcoin if it is accepted by the largest existing block chain.
So a bitcoin must follow certain rules if it is to be considered to be valid, and this means it has certain intrinsic properties. For instance: if you have the private key that signed the last transaction for the bitcoin, you can extend the bitcoin with a new transaction, and that bitcoin will still be considered valid.
So I'd argue that being able to cryptographically transfer a bitcoin is an intrinsic property of the bitcoin, and therefore something that gives a bitcoin intrinsic value (assuming you think this property is useful).
I have a hard time believing the intrinsic value of anything is zero.
Well shit man, I have some random bytes I'd like to sell you. How much are you willing to pay for 'em?
So I'd argue that being able to cryptographically transfer a bitcoin is an intrinsic property of the bitcoin, and therefore something that gives a bitcoin intrinsic value (assuming you think this property is useful).
Like I've said before (and nobody has yet taken me up on this offer), I'm selling Bitcoin Prime. This has the following properties:
1. Every string of bits that is a bitcoin is also a bitcoin prime
2. All bitcoins prime currently in existence are owned by me.
Does my huge stock of bitcoins prime have any intrinsic value? I think not. But if anyone disagrees them I'm more than willing to part with my entire collection for a hundred US dollars. (I reserve the right to invent bitcoin double-prime as soon as our transaction is completed...)
My point: even if a bitcoin is a string with some unique properties you don't actually own that string of bits in any useful sense, you only own it by convention with other bitcoin users. Bitcoin is just one of an infinite number of possible equivalent systems, and just happens to be the only one in which there's any real money floating around at the moment.
You may have a point with the random bytes. That is as close to worthless as makes no difference.
But regarding your "Bitcoin Prime": your system isn't backed by proof of work. My point is that bitcoins are not just a set of random bytes, or even a chain of signed transactions. They are also secured by a proof of work chain, and without this they are not bitcoins, by definition.
So even though you can come up with a set of bitcoin primes, one for each bitcoin, there's no proof of work backing your system. You can't reuse the proof of work that backs bitcoins without knowing all of the private keys, so you'd have to start from scratch.
I have a hard time believing the intrinsic value of anything is zero.
Think of the contrast between “value for use” and “value for exchange”. A gold coin, even if you have no interest in exchanging it, can be pretty to look at, or melted down for jewelry. A share of stock, even if it is not being traded, gives you voting rights and possibly dividends. Fiat currency has damn close to zero use-value, but at least you can use it to pay taxes to the country that issue it.
By contrast, without a market for bitcoins, a bitcoin is just a record of spent CPU power.
Not quite. The CPU power spent on a bitcoin guarantees that a certain level of work must be performed to reverse an existing transaction. In other words, an inherent property of a bitcoin is that it is hard to double-spend.
Creating a token of information that cannot be spent more than once is hard to achieve without relying on a central trusted authority, so I'd argue this inherent property of bitcoins is useful and valuable.
Those factors affect a bitcoin’s exchange value: for the purpose of exchange, a bitcoin is arguably more valuable than, say, an original haiku. But the difficulty in double-spending bitcoins is irrelevant if there is nothing to spend one on in the first place.
(On the flip side, there are things whose use-value exceeds their exchange-value. If, for example, I am hungry and I have one fresh fish, I would derive benefit from cooking the fish and eating it, but if I’m not standing in a fish market, it’s probably not worth the effort for me to sell it.)
The overall bitcoin protocol has some use-value: even if people stopped trading bitcoins, the protocol for running the system would be a worthy object of study for cryptologists. But you can derive that kind of benefit from the protocol without owning a single bitcoin.
If we can agree that the protocol has value, then the only question is whether or not an individual bitcoin exists outside the protocol. I'd argue it doesn't. You can't point to a sequence of bytes and say "that's a bitcoin".
Instead, a bitcoin exists only as an agreement between the CPU-majority in the network. They agree that user A solved a block, and therefore is entitled to new coins, and they agree that user A transferred that coin to user B, and so forth. But there's no piece of data that specifically represents a bitcoin. Outside of the bitcoin network, bitcoins don't exist, and therefore it's meaningless to talk about them in isolation.
It's not really that big of a deal. Your cup of coffee might vary between $0.50 and $5, but it averages out to $3.
Anyway, it's all a grand experiment! Isn't it fun?!
It's going to be a long time before Joe Schmoe is paying BTC at the Exxon station. By the time we get there it'll be much more stable, and there will be banks that charge you for stability.
Oddly, market conditions seem to have conspired to give bitcoin what is essentially "backing" for the time being: that being goods and services which are available only by bitcoin and not by other routes. Among these include ways to buy products not ordinarily available in a country (such as the recent newegg-via-bitcoin site that showed up) and illegal products (such as Left 4 Dead 2 in Australia, or the more obvious example of psychoactive drugs). So I doubt you'll see it crash all the way, though it will probably remain unstable for the forseeable future.
The bitcoin market has always been unstable and anyone who tracks mtgox for more than two days (and often even those who track it for less) knows this. While a part of me wishes I had put more into it at $0.70, it is definitely not any kind of stable investment. If you're into btc to invest, you should be really, really careful to place only a small portion of your money into it; while you may get lucky and hit a 3000% increase, I wouldn't count on things to stay that way for any reasonable time period; as below, just one big btc holder selling off can drop the price of the market hugely, as supposedly happened this weekend. Take into account btc's prospects for government disruption/poisoning/etc and it is definitely a very unsafe place for any significant amount of money.
Well, it's not too tricky to buy foreign computer games in Australia; the authorities don't care that much. And the drug thing? Well, it remains to be seen how long it'll be before the authorities shut that one down.
Many people hear that btc is an "anonymous currency" and think they're free to participate in all kinds of illicit activity on btc. The reality is that every btc transaction made is publicly recorded and the so-called "anonymity" depends on the obscurity of the btc addresses used in the transaction. Also note that these implications are not necessarily isolated to one transaction; if you and your partner both make a trade using new btc addresses, the coins that were traded can be traced all the way back to their generation and perhaps someone two transactions up the chain will provide a lead as to who is doing what ("oh yeah, that was a trade I made with Johnny...").
Additionally, if the government ever seizes the wallet of a dealer, which is likely to occur in the event that a search warrant is executed, they will have a list of addresses with whom the dealer has traded. These addresses can then be found and traced in the publicly-available tx chain. In this way even innocent people may be implicated in investigations surrounding illicit trades, and trading with a person that doesn't understand the implications of reusing or publishing a btc address can significantly weaken not only your transactions but other transactions that occur in the network.
The anonymity issues surrounding bitcoin are certainly more thorny than they appear on the surface. If you intend on using btc for illegal purposes, you need to understand what you're doing and be very careful, just as I'd imagine you need to do when trading illegally in other media.
Theoretically, someone could make a BTC to BTC anonymizing service. You could even put your BTC through multiple anonymizing services, similar to how you can route network traffic through multiple proxies.
Yeah, his description qualifies as money laundering; it's not any different than running the money through multiple proxies (fake businesses, escrow services, etc) in real life. And if a guy gets brought down after using this kind of thing he'll still get stuck with a money laundering charge; it doesn't become legal magically just because it's done with btc.
Bitcoin's daily trading volume is incredibly small. That means if some even remotely large investor decided to buy or sell in volume, it would move the needle in big ways. I doubt there will be any kind of stability in Bitcoin volume until it is being traded in the billions or trillions of dollars, not in the millions of USD.
So aside from the "crash"...How many of you sold at $30 and repurchased at $10 only to sell back at $25?
I unfortunately had nothing to reinvest otherwise I would have been all in on that ride.
(Another symptom of the bubble: there's a three-month backlog. (Was there a backlog on Aeron chairs in 1999?) Considering the primitive tools and exorbitant markup, I can only assume that people are ordering these for novelty purposes.)
I was help a friend work out whether it made sense to start paying for Amazon EC2 to mint bitcoins. I can tell you that yes, thin bids and poor liquidity was exactly what I found.
I am not saying to trust LulzSec, but to address this information? Also the price is roughly 24 hours old. I don't think this article deserves to find its way on the front of Hacker News, by the time it did, the information contained in would be 36 hours old and the numbers cited off by a factor of 4.
Although I must admit, the Financial Times covering bitcoin is news in itself.
LulzSec's claim has been discussed on Reddit and the Bitcoin forum. The selloff bitcoins are apparently from very old blocks, and since LulzSec is a recent phenomenon...
I said at the time that LulzSec's claims were possibly an attempt to deflate the market to gain an easy in. With a small market a big buy in should itself create inflation of the price.
If I was right then LulzSec or whoever paid him just minted it ... or at least they did if they can ever get their money out again.
I just got down voted for pointing out the article is factually wrong and suggesting that it not be up voted for that reason. Believe what you want to believe internets!
What is factually wrong about the article? It seems to me that what it is reporting is the dramatic drop on Friday.
Whether or not the price later regained what it lost on Friday does not really impact the main point of the article - the existence of such a drop, no matter how temporary it was.
I can't speak for anyone else but personally I downvoted you for:
a) Telling people not to upvote something, and
b) Justifying that in terms of something I'd never heard of (what's this about lulzsec's claim?)
Most of the time when an article shows up on HN there's a bunch of comments criticising the article for being, in some way, incomplete or wrong. But generally they don't directly tell people not to upvote the article. If you wanna criticise the article just say "One important factor which this article doesn't mention is that LulzSec said the other day that [blah blah details for the uninitiated]"
