What could cause a single digit crash...and could bitcoin recover?

[Geist]

Hey everyone, I've been reading the speculation forum quite a bit, and some people(who may just be utterly insane) are saying that the bitcoin could bottom out in the single digits.

What exactly could cause this, and would bitcoin ever recover from such an insane crash?

[Grantmo]

All posts are speculative (opinions) about which way BTC could be headed.  So, with that in mind, my answer to your question is just that, an opinion. 

For bitcoin to plunge down to single digits (in USD), there would have to be a major problem with the bitcoin technology or a large anti-bitcoin ruling from the US Government. Either of these would cause a loss of confidence in bitcoin and therefore make the price drop.

At that point, it could get back in the double digits slowly while confidence in bitcoin as a currency was built back up. I don't see bitcoin going away anytime in the next several years.  There is simply too much invested in it for people to walk away from it regardless of a ruling from any goverment.   

[DeathAndTaxes]

It would have to be some catastrophic and highly unlikely event:
* MtGox closed and assets seized for violating AML.
* Critical 0-day flaw found in ECDSA
* Massive 51% attack
* SR admin turns states witness

I am not much of a chartist (especially on day to day moves) but I can't see any market manipulation, bubble popping, or minor issue that would drop demand that low.  Hell even if nobody but SR and Satoshi's Dice used Bitcoin I think $10 could be supported.

[anpk]

Why does it have to be anything catastrophic? If it can go up 10 times in a few months, no reason why it could not go down 10 times into single digits.

Bitcoin still has no real demand other than hoarding....

[nobbynobbynoob]

Bitcoin still has no real demand other than hoarding....

Troll much? 'Cause it's funny how I can (and sometimes do) actually buy real stuff with BTC. And not just gambling or SR either.

[captainsik]

I think that it probably won't go down to single digit. With the current mining difficulty, it will cost more for miner's electricity to mine them. So, miners will not sell below their electricity cost.

[RodeoX]

Why does it have to be anything catastrophic? If it can go up 10 times in a few months, no reason why it could not go down 10 times into single digits.

Bitcoin still has no real demand other than hoarding....

another 3 post count expert.

[DeathAndTaxes]

Why does it have to be anything catastrophic? If it can go up 10 times in a few months, no reason why it could not go down 10 times into single digits.

Bitcoin still has no real demand other than hoarding....

I beg to differ.  SR is a real marketplace, maybe not the best for PR but it is real commerce.  Bitpay announced $5M in sales last month.  Satoshi Dice does some significant volume.  Other gambling sites have taken a look at Bitcoin, CC fraud on gambling sites is a huge revenue drain.  Our small company sold almost $600K in bullion in the first quarter of this year, I have no hard numbers but I would guesstimate that all Bitcoin bullion sales combined are at least a million a month.

Sure it doesn't warrant $260 valuations but Bitcoin (the protocol itself) has proven it works.  VC companies have put money into companies like BitInstant and BitPay.  Better companies = more demand for Bitcoins.  I would find it hard to believe that the same VC dumping millions into companies wouldn't buy the crashes.  It is a way to gain additional exposure at potentially better valuations.

Still all the above is just my opinion.  I guess anything is possible but I just don't see it happening (outside of major events like the ones listed above).  I think even without the media hype, and speculative bubble (both times) Bitcoin would be valued >$10 right now.  I mean that is only $110M which when you think about it for an entire planet is a pretty trivial sum.  The gold in world of warcraft is probably worth almost that much (despite Blizzards rampant gold inflation).

[DeathAndTaxes]

I think that it probably won't go down to single digit. With the current mining difficulty, it will cost more for miner's electricity to mine them. So, miners will not sell below their electricity cost.

Well no that isn't true.  Miners will stop mining, difficulty falls and eventually the cost of production can number.  Price drives difficulty.  Difficult never has and never will drive price.

[anpk]

another 3 post count expert.

Funny I thought this was the newbies forum, guess this where experts hang out...

[Grantmo]

Why does it have to be anything catastrophic?

When Henry Ford introduced the Model T, infrastructure was built out, technology was invested in and more and more cars were on the US highways.  At today's volume of cars on the road, gas prices could spike, fuel taxes could go up, personal jet packs could be invented, but the volume of cars will never be the same as it was when the Model T was introduced.

Unless something catastrophic happened. Like cars were against the law.  

[SgtSpike]

An anti-Bitcoin government ruling could certainly cause the price to plummet to the single digits.

[anpk]

Unless something catastrophic happened. Like cars were against the law.  

Obviously I'm new and I'm not going to make too many friends while arguing against bitcoin going up, but its similar to gold. People not trusting currency have gone into gold traditionally. Even with that, gold is going into the deflation territory primarily because of supply and demand. So its not unreasonable to assume that unless you have more avenues of demand for bitcoin (other than drugs and guns), it can and should go down.

[PeZ]

I think that it probably won't go down to single digit. With the current mining difficulty, it will cost more for miner's electricity to mine them. So, miners will not sell below their electricity cost.

Isn't there already 11 million in circulation?

[conspirosphere.tk]

An anti-Bitcoin government ruling could certainly cause the price to plummet to the single digits.

Then I would have 2 reasons to buy MOAR

[Grantmo]

Drugs, gambling, sex, and weapons have driven economies for centuries. Romans?  And will continue to drive economies and currencies on this planet going forward. Sadly, this is a valid point.

[BNO]

I think that it probably won't go down to single digit. With the current mining difficulty, it will cost more for miner's electricity to mine them. So, miners will not sell below their electricity cost.

That argument is very flawed. It would be as arguing that a stock can not fall below e. g. $100 because so many people bought at that price so they won't sell it below. Well my 15+ years experience in the stock market tells me a little different...

[VishwaJay]

The rules are simple: supply and demand.

The more Bitcoins there are, the greater the supply.

The more that people want them, the greater the demand.

If there are more coins than there are people who want them, the price drops.

If there are more people who want the coins than there are coins, the price rises.

As the price drops, continue to buy up coins. Keep buying as the price goes down.

When the price goes up, stop buying. Sit on them until you're making money. If you're making 20%, then you're doing well (most currency exchange people I know are making 10-15% on average, to make a living).

When you're at your 20% or above, sell them off. Wait for the next price drop (which won't be as low, generally speaking). But if it drops, get excited because that means more opportunity to profit.

This is just basic investing... there's no particular strategy to what I wrote--you make money when you buy, not when you sell. And even if Bitcoin drops into the single digits, I'm not that upset.

But the really creative strategies are the ones that tend to make good money. If you figure one of these out and make a lot of money, that's your secret!

[VishwaJay]

I think that it probably won't go down to single digit. With the current mining difficulty, it will cost more for miner's electricity to mine them. So, miners will not sell below their electricity cost.

That argument is very flawed. It would be as arguing that a stock can not fall below e. g. $100 because so many people bought at that price so they won't sell it below. Well my 15+ years experience in the stock market tells me a little different...

I have to support that there is a basic flaw in the argument (I agree on that point), but the issue isn't whether or not miners will stop investing... they own their machines, and if they're making enough to justify the support cost, they'll either continue mining (ignoring the exchange) or they'll stop mining (because it's no longer worthwhile).

Facts are simple: people DO lose money when they panic sell. Most do in fact sell to "cut losses" instead of holding onto what they have. In the words of a wise investor I once met: "What goes down must come up."

I'm just glad that this opportunity is here right now, if it keeps dropping I'll have some serious means to snap up some Bitcoins.

[VishwaJay]

Bitcoin still has no real demand other than hoarding....

And buying Bitcoin miners.

And pizza, where I live, from one vendor.

And coffee, where I live, from one vendor (one manager at one chain will allow me to buy coffee at exchange rates... and the price of coffee is rising, which means my local currency is dropping).

I'm trying to talk a locally-owned grocer into accepting BTC for groceries, but it's a hard sell.