Bitcoin Forum

What's the reason for the current BTC crash? Two days ago a coin was a little bit more than $14 what was the highest value since the last big crash in June 2011. Within the last 2 days the value crashed down to $10 and may will fall much further on. I'm just wondering what the reason for the crash this time is. Is it once again because of a lot of cracked websites and stolen coins? Does anybody know why this happens right now?

Lot of things happened. The biggest factor was the end of pirate's project and mass panic.

Thanks for your fast reply. What do you mean by "pirate's project"? And what else happened?

This was kind of a strange reason for myself, after a few hours of checking who he was, I found he was a big player that was running a BTC company called Bitcoin Savings and Trust that was offering a staggering 7% return on investments.  Only high deposits were accepted so many other stocks were created called PPT (Pirate pass through) that enabled some sums to be contributed to pirates offering.  Well, a few days ago he closed up shop, and nobody is sure if he'll pay out his investors or not.  He was in possession of several hundred thousand BTC at the time.

For the past 8 months, some guy called "pirateat40" was running some kinda service (or ponzi scheme as some would say) called Bitcoin Savings & Trust, which was closed (https://bitcointalk.org/index.php?topic=50822.0) last friday.

Tons of people invested money in this thing (I believe pirate was estimated to hold 400k ~ 500k of other people's bitcoins) and now they're hoping to see anything back.

I think the price drop was merely caused by mass panic. Nothing was hacked, nothing was stolen YET (although nobody's sure whether pirate will pay back all his lenders, or disappear with ± $5 million worth of BTC) and certainly nothing happened to the actual Bitcoin concept itself. Just like the earlier Mt.Gox and Bitcoinica incidents, this was just an issue with some independent 3rd party business that happened to offer Bitcoin-related services.

Moreover, all the unique properties and characteristics that made Bitcoin such a revolutionary concept (as listed here (http://bitcoinmedia.com/bulleted-advantages/) or there (http://whybitcoin.tk) for example), remain all the same. Essentially, nothing has changed, and Bitcoin has the exact same bright promising future ahead of it, regardless of this temporary panic price drop.

Good answer. That's what I meant by saying "pirate".

7% per week, mind you :) That's over 3300% yearly interest. Doesn't take a genius to figure out that such a scheme wouldn't hold.

Thanks for your posts. I know that Bitcoin itself isn't the problem. I had no idea about Bitcoin's existence in June 2011 so I wasn't able to make profit from the crash then. I'm waiting for the next big crash to buy a lot of coins when the rate is very low. That's why I'm interested in the reasons of this crash and how deep the prize will fall within the next days. If this guy really got $5M in BTC then I don't think he will republish his service and payback all that money. You can live a very happy life with that amount of money if you know what you are doing. So my advise for the masses: Panic more and more so the prize will fall further on and I'll be able to buy coins for nuts sooner or later :).

Who knows how deep it goes?
I guess, we will find out after this monday when bank transactions kicks in.

 I know the article about Silk Road sent BTC to nearly $20 but what was the cause of it's crash down to $2 in Nov-Dec of 2011. Any info or a link to a thread about it would be much obliged.

You say crash, I say a natural point of the buy/sell cycle.

Take advantage of the drop and buy Bitcoins. Then wait until the price goes up again and you can point and laugh at the people who didn't.

You are right deus-ex-machina. The question is just when. The value is going down very quickly. It's currently about $8.5 ( http://bitcoin.clarkmoody.com/ ) and who knows how far it will fall down within the next days. My advise is not buy coins right now. Sell if you have a lot of as long as the rate is 'high' if you don't think in the long term. I think it will fall down to something between $2 and $5 within next week and stabilize around that rate. Then it's time to buy... Just my thoughts.

But the funny thing is that he has been paying this 7% since november last year, and the word is he is paying all the money from the accounts too.

No no no, If people stop buying then the price will continue to fall.

People need to buy, and rally to it. If Pirate tries to start a panic the only way to stop it is to buy.

Most people were buying into Pirate at under 10 per BTC, 5point drop doesn't do much for him. The entire scheme requires him drop the price much more. If he cant trick the market he cant make money.

tell holders to not buy/sell now is irresponsible

Besides, long term everyone on here knows long term bitcoin is promising.

Has anyone successfully cashed out from him?

yes, He has been carefully watched. He has held his promise on all his payouts. Most people return to his 5000BTC+ higher rates only after getting early buyouts.


But thats the same for any ponzi, its all about giving investors a taste, then cutting and running.

I've been watching this pirate thing for a while and I didn't really understand how people could be so incredibly stupid. They use bitcoins to escape government bullshit and whatnot, yet they happily run right into scammer's hands. It was a clear and blatant ponzi scheme and the current situation is really disappointing. Even more, when I realize that although I didn't fall for pirate's bullshit, the value of my assets in bitcoins falls rapidly anyway due to the situation on the market.

Now I only hope the panick doesn't last too long and the community wakes up from its 'momentary lapse of reason'. There is no reason why people should sell all their bitcoins for such low prices. If everyone realizes that, everything will be alright again.

In conclusion, people's stupidity deeply saddens me. I beg everyone :  don't let emotions win over logical thinking, don't disappoint the community again by selling for low prices. Otherwise you will harm both yourself and the community.

It's easier to get the people trust if you provide the service as legit from the start. As soon as enough money is sitting in all the accounts the owner will think about 'stealing' all that money. It doesn't matter what the service was about and how he did it. All that counts is the amount of coins got 'stolen' (or better said 'taken' by the project owner). A lot of the people think that it's a problem within Bitcoin itself instead of knowing that it's just that one 3rd party and so the crash of the rate is a logical event. The most of the people still just don't get what it is all about and never will. So those who understand it can profit from the market.

Yeah, a crash of this magnitude set off because people fell into a ponzi scheme is not good press for bitcoin.  :(

No, it's not a funny thing. Actually it's the usual modus operandi for ponzi scammers. In the begining everybody is cautious, only a few people invest some little money. You give them huge profits (compared to small investments) and their greed makes them invest more and more. Soon other people see how their friends are getting rich and they get envious and greedy too. So they invest, despite the fact that it is a blatant ponzi scheme.

In the general discussion, there was a link to an article about a major ponzi scheme on some online game. It was brilliant. It depicts the simple mechanism of ponzi schemes. Everyone should read that. And those who fell for pirate should read it twice daily : when they get up from bed and when they go to sleep.

You are assuming too much. There is no reason to call him a scammer. He has not "scammed" anyone. Like I just said earlier he has never missed a payout. He has a microscope on his every move.

If he keep his promises and pays out all his investors you will eat your words. He just ran one of the most successful investment banks bitcoin has ever had.  

or he cuts and runs and everyone points and laffs at investors with the biggest I told you so ever.


The interesting thing about about bitcoin is we can watch all these really large accounts.

Now realize this. If he doesn't have the BTC to cover his investors whats the only way to get it? Buy

And if he has a limited cash funds to payout to cover the investors the only way he can make this whole bank work is if he can buy them cheap enough.

There is a price when Pirate40 can cover his payouts and he is waiting to hit that before he buys and covers all his payouts and still walks away with a ton of money.


Im actually willing to bet he will be successful.
Im going to look on betsofBTC.com now and look for that lol.

Well, then let me assume some more. I assume that you are one of the people who invested with pirateat40 and that is the reason for your rather naive post. Am I right?

Furthermore, let me assume that you aren't into mathematics. If you were, you could easily calculate that pirate would soon need more bitcoins that can be possibly generated to make his 'business model' sustainable. You can read the general discussion. Some people have already calculated that for you.

Finally, I assume, that you have no idea what pirate's business model is. How can he possibly generate 7% profit every damn week? Do you realize that with such business model he could easily get money elsewhere? He would become a billionaire in no time and probably get the Nobel Prize in economics.

Am I right with my assumptions?

no I am a poor student, could never afford invest even close to his buy in. like 1000btc, 10kusd you kidding me?

I am into math, And I know 7pct week is an insanely lucrative investment in the banker world. But when you think about it 7pct change in price for bitcoins is common.

If he took your 1000btc investment and cashed it out to USD. If at the end of the week there happens to be a 7pct decrease in price he buys and payed you back without doing anything. anything more then 7pct he profits.

Im am simply saying it doesn't take a genius in economics to understand how these market works and profit.

Pitate40 controlls large amounts of usd and btc. He needs to payout a very large amount of btc he probally doesnt have. If I were him id dump enough to crash the price then buy enough to cover the payouts.

Its really all about the Ego of Pirate; Everyone in the market is now gossiping on him. Will he payout his investors? And a lot of people are like you and say of coarse he can't, and when these investors sell coins to cover there losses, or pirate himself dumps all the BTC price is going to crash. So you sell and crash the price before he even moves.

Does he want to go down in history as a good pirate, or a stab you in the back pirate. I think he has far more to gain long term if he does payout. And the way the Market looks like he might be able to pull it off.

Because hey, why would some one say, im going to pay you, then cut and run. If I were an evil pirate I would have a huge firesale, like a 50pct return on single week. then cut and run on day 2.

But maybe you are a pirate investor and want people to freak out. droping the price in hope pirate can buy enough btc to pay you back.  ;)

It doesn't really matters how he did it and if he will pay back or not. He will win anyway and that's because too many people trusted him and so made him one of the biggest bitcoin holders and we all know that people having a lot of items from any market are able to 'manipulate' it. The decentralization simply make it easier to manipulate the prizes. As long as there are exchanges with FIAT currencies it's the same bullshit than with any FIAT currency. Do you really believe that the US government isn't interested in bitcoin? They can profit a lot from the market because they simply print some USD, by BTC provide services like that pirate story and crash it all down.

I had this idea that people were able to grab all their coins from pirate thus lots of coins are being distributed and maybe the reason why it crashed.

on the other hand... it might be the opposite... not really a math guy... but I hope it goes back up soon.. i invested around 2weeks of my time in bitcoin... and I kinda like the concept...

I just hope it can stand back up again...

well a keynesian would say this is why we need banks like the federal reserve. That way there is a bank to buy up all these bitcoins and prevent inflation. And when the prices start to go up; is there to print more coins to make sure you can feed your kids.

We do not need banks but some people would like to have their coins within a 'bank'. Then it's a matter of trust and yes the printing money isn't directly an issue but if a bitcoin bank have a huge amount of coins investors like the fed will be interested in that bank. But all this isn't a problem of bitcoin. It's a problem of our system. Bitcoin isn't the solution for our corrupted system. It's just a step in the right direction.

7% change per week is not uncommon. However, the price has been rising since May. Until then, it has been pretty flat. Therefore pirate's profits couldn't be sustainable merely from changes in the price.

Ironically, you are right - it doesn't.

I'm afraid market doesn't work like this. If you start dumping your btc, the price would start falling. You would get less and less money with each sold 'bundle' of bitcoins. Then, you would start buying and the price would increase. In the end, your balance would be aproximately the same.

This is exactly how ponzi scheme does NOT work. When you announce 50% return per week nobody believes you. Naturally. And when you finally find a lunatic who gives it a try, it's only a little investment. People are cautious ... at first. If you run away, you only get a bunch of bitcoins. If you want a really big loot, you have to build trust. Let them make profits from their first, small investments. Then they give more and more and they persuade their friends to invest too. Do you think pirate got his incredibly huge investments over night? Hell, no. It took him several months to build his investment base. And he paid the early investors from deposits of latter investors and so on. You know, this kind of scam is also called a 'pyramid game' in my native language. It is a very self-explanatory title. Imagine a pyramid. Your first investment is on the top. You pay the profit from the deposits of the line below (say two or three new investments), then when these investments mature you pay them from deposits of the line under them and so on. By the time you reach the bottom, you have a shitload of money. But you can no longer find new investors and the old ones have already invested everything they could. That's when the pyramid collapses. This is a very common scam. If you search 'ponzi scheme' on wikipedia, you'll find out that this has been done many, many times in all parts of the world during history. People have been falling for this type of scam for centuries. Some of them even more than once in their liftime! It's both terrifying and amusing.

I assure you that I'm not a pirate investor. I would be one if I had the chance to invest in the begining. Because only early investors profit from ponzi schemes. However, I sincerely hope you are right and Pirate SOMEHOW pays the money to his investors only to let the pyramid collapse later. This time, I will be ready.

But anyway. To get back to the topic: The rate seems to be currently 'stabilized' by about $8 within the last few hours. The banks in china will be open very soon. So a rate change will coming very soon again.

Yeah, I hope that people will come to their senses and with banks open for trade, the market will liven up. I repeat : there is no reason to sell bitcoins this cheap. Even if Pirate runs away with the investments, it's just that their owner has changed (since their previous owners were idiots). Nothing changes for the rest of us. The concept still works.

The prize could also go down. Too many people know about bitcoin and using it. It's not a geek only 'currency' anymore. so there are a lot of stupid people using it.

Bitcoin is limited. Therefore more people using it = higher price per bitcoin. This is exactly why the price will go up (by enormous factors) in the long term, regardless of any temporary spikes and drops (which are just incidental market hype and panic movements).

It's not bitcoin's fault. Things like this happen all the time with fiat currencies. People just have to learn basic economics. Some of the them the hard way. Everything will be alright, once the market wakes up from the shock. That's all.

pirate@40 plan seems not a ponzi but a very succesful way to influence the btc exchange rate by taking the coin out of the exchanges and sitting on them. the price will return to where it was before pirate@40 started to take large quantities of coins out of the market. as the coins are put back into the market and back on to exchanges price will return to where it was when BCST started.

wrong. less bitcoins mean higher price. thus, if he took large quantities out of the market (as you claim), the price would go higher. if he gave them back, the price would fall.

Nothing disappears in the nature.

Reason for current Bitcoin crash

Money, plain and simple. ;)

The unfortunate thing about this all is that this will be another black eye for Bitcoin in the press.  Look at all the articles already - they point to the previous issues with Bitcoin-related services (MtGox hack, etc.) as "troubles" with Bitcoin.  Educated people know enough to see through blatant inaccuracies like that, but for everyone else its "Look! Another reason why Bitcoin is bad!". And if they say a (suspected) ponzi scheme that even affected unrelated people, well that is doubly bad.

I have no doubts that everything will recover in time, including the reputation of Bitcoin; it's just sad that these incidents are linked with Bitcoin, rather than a scammer.

Bottom line - put "criminal activity" and "Bitcoin" together in a sentence, and you have a news-worthy story.

Thank you! When most people hear percentage returns they understand it as an annual percentage rate a 3300% APR return illustrates the gravity of the claim.

Sell everything till it goes down to 3 USD/BITCOIN

Even if Bitcoin gets in the news in a negative light, that is only short term.  Long term it seems like it would be beneficial because Bitcoin is getting attention, getting the word spread around. 

Even currencies, stocks, and other types of investments have ups and downs.  For anyone to even really put Bitcoin in the news, even if negative is good imo.  Kinda legitimizes bitcoin as an investment outlet.  Just that many more people know about it and will research it. Investments usually really only make the news too if sometime bad happens, unless you are a large booming industry like Apple.  Then you are always in the news good or bad.

I look at the market a lot like a stock.  Very risky, but can be very profitable.  Stocks can have have crazy ups and downs too.  Just because the stock is $8 today doesn't mean that it can't be $50 the same time next year or even regain all its losses within a couple days.  Or even go lower.

I'm kind of hoping Bitcoins go back to around 5 or lower, so I can buy back in.

Well it climbed back up to $9.  I don't know if I should be selling every thing before it drops super low or will it?  I only have 2.2 btc but I was going to buy a gift card in btc sometime in the next few days so I can get my mom some new desktop speakers  :P

none of this really matters.  will BTC reach $15 ever again?  yes.   will people be scammed again?  yes?   will the market crash again?  yes.  its all trivial, but BTC always will recover somehow.

This will not happen. If you want to buy, now it's the right time do that. The price is recovering, so I advise you to move your asses and go bullish.

Words of wisdom, dear sir. Words of wisdom.
+100 internets to you  :)

Why would more people use bitcoin?

It's pretty hard to put "legitimate activity" and bitcoin into the same sentence. Bitcoin has Silk road, gambling (evading US laws), and ponzi schemes. Is there anything legit?

I for one love panic. I have found that the most profitable circumstances arise during a panic. New peers especially are vulnerable. They buy at $13 then they see that the price has dropped to $8 and dump their coins. Of course later that day the price has gone up to $9 and there is a lot of crying.
The best time to buy is when people are panic selling. The best time to sell is during frenzied buying, like last weeks rapid climb to $14. Those people are acting irrationally. Timing it is the trick. How high and low will she go? That is guesswork. 

not getting the best press either ..

Another subj: Liberty Reserve mass account blocking https://bitcointalk.org/index.php?topic=101955.0

Another subj: bubble-like price jump

Because of the many great advantages, like the points listed here (http://bitcoinmedia.com/bulleted-advantages/) or here (http://whybitcoin.tk/).

Similarly, people would ask in the early 90's:
"Why would more people use email, when regular post works just fine? Email is just cyber stuff for nerds and techies."

pirate makes the crash so he can short the coins then buy for less. else he can not pay back invests