Impaler
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May 28, 2013, 09:41:12 AM |
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The Donut article is rather flimsy on an intellectual basis, it ignores the block-reward halving which did in fact create a supply contraction much greater then an small mining increase from ASICs temporary getting ahead of difficulty. We have the history of the Mt.Gox order book depth and it has been declining from well into last year and hit a low of just 2 weeks worth of mined coins just before the crash.
I believe the ASIC's are in fact the root cause of the bubble, but they operate by allowing miners to retain more of their coins as personal before-market hoards as they are so efficient few if any coins need to be liquidated to cover marginal electricity costs. At the same time GPU miners are doing their swan-song and their operators likely want to get a final nest egg of BTC's before they stop mining. Together these phenomenons dried up the inflow of new coins to exchanges and resulted in a price run up, which then went parabolic via classic speculative greed, new suckers buying a rapidly appreciating commodity in the hole of finding a bigger sucker.
Eventually a high enough price brings enough hoarded coins onto the market to pop the bubble. BTC don't really circulate, the total monthly commerce in BTC is done with less then the total monthly mining rate of coins so the average new coin gets used in a transaction once before going into cold storage if its lucky. So it dose not actually take many coins jumping onto the market to crash it, but BTC hoarders correctly perceive that deflation is inevitable due to reward-halving even if use of BTC is flat, and if they just hold longer they will gain hugely so they do.
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