[FORBES] The Bitcoin Crash - New Article, Forbes Claim is Doom

[BitcoinPorn]

Bitcoin, the world’s first peer-to-peer digital currency, has lost almost half of its value against the dollar since the start of August, falling from $13.50 to around $7:

It’s now looking increasingly likely that the record-high price of $32 on June 8 represented the peak of a speculative bubble that is now slowly deflating. The interesting question is: where will the price decline stop?

Most assets have a “fundamental” value: the value that reflects the practical use to which that asset can be put. You can always live in a house regardless of what happens to the real estate market, so we can be confident that house prices won’t fall to zero. Similarly, if the price of gold fell too much, people could always use it to make jewelry, so gold is a relatively safe investment.

The puzzling thing about Bitcoin, which I pointed out back in April, is that the currency doesn’t seem to have any fundamental value at all. True, you can currently purchase a limited selection of goods and services with Bitcoins. But the volume of Bitcoin-denominated commerce is small enough that Bitcoin-denominated prices seem to be driven by the current value of Bitcoin rather than the other way around.

This is different from traditional currencies. The fact that there are 300 million Americans who use dollars for their day-to-day transactions creates a floor for the value of dollars. Most of us don’t pay much attention to the exchange rate between dollars and other currencies, because we’re used to thinking of dollars as our fundamental unit of value. And even if we wanted to stop using dollars, it would be hard to do since most of the people around us won’t take anything else. So, barring a major screw-up by the Federal Reserve, we can count on the value of dollars not falling very much.

In contrast, there’s no significant community of people who conduct commerce exclusively (or even primarily) in Bitcions. And you can’t eat, live in, or make jewelry out of Bitcions. And this means there’s no logical stopping point to Bitcoin’s price decline. So far Bitcoin enthusiasts have been buying Bitcoins as the price falls, convinced that the price will go back up eventually. But as the hoped-for rally has failed to materialize, more have gotten discouraged or bored and cash out, pushing the price down further. This process has been going on for a couple of months, and now it appears to be accelerating. I suspect it’s terminal.

http://blogs.forbes.com/timothylee/2011/08/07/the-bitcoin-crash/

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[airdata]

And as always, you can always remove 'Bitcoin' and replace it with 'USD' and all statements will be true.

[makomk]

And as always, you can always remove 'Bitcoin' and replace it with 'USD' and all statements will be true.

You're trolling, right? Because the reason the same isn't true of the USD is fairly thoroughly explained in the bit of the article BitcoinPorn quoted.

[the founder]

the problem is the article is partially correct.  

If we continue down this path of stealing, hacking and robbing each other regarding bitcoins,  it WILL fail.    I spent large amounts of money building flexcoin... I'm betting big that we'll be okay....   but in order for that to happen there cannot be another "150,000 coins stolen / robbed " every 10 minutes....  

think about it.

1 - dude saw 25,000 coins vanish from his desktop
2 - Goxed
3 - polish exchange 17,000 coins
4 - mybitcoin 150,000 coins
---- this list goes on....

I understand hackers...  but what's happening with most of those cases isn't hackers...  it's criminals and thieves...  that's not the same thing...   not even close.

hacking always meant (at least when I grew up) to try to break something... just to see if you can....   and if it turns out to be a security flaw you told the developer before publishing it.  

This?  These are people that steal bitcoins and in essence destroying what they are stealing,  hence they are idiots.

Picture this...  a company builds a program that secures stock transactions on NASDAQ and is listed on the said exchange....   hackers target the company,  and hack their software where they "steal a bunch of shares of it" ... then the criminals try to dump it as everyone else is because their "secure" software isn't so secure.

In a nutshell,  each time they are stealing it it's destroying the very nature of what makes it appealing...  hence destroying it's value.

It's my feeling that these people are not actually motivated by money...  they have a goal.. and that includes destroying bitcoins.

[BitcoinPorn]

Though this thread is not the place it will be heard best, great point regarding the misuse of the word hacker, which I know I do just to get points across to people.   But in that dumbing down the terms used for people, that is really taking away from the positive aspects to hacking, I need to be more aware of that personally.

[Steve]

The puzzling thing about Bitcoin, which I pointed out back in April, is that the currency doesn’t seem to have any fundamental value at all.

This statement is nonsense.  A bitcoin itself might not have any intrinsic value, but the bitcoin platform has plenty of fundamental value.  The author is dead wrong on this point.  The issues will get resolved in time, effective defenses against theft will be crafted, and bitcoin will survive.

[Rob Lister]

the problem is the article is partially correct.  

If we continue down this path of stealing, hacking and robbing each other regarding bitcoins,  it WILL fail.    I spent large amounts of money building flexcoin... I'm betting big that we'll be okay....   but in order for that to happen there cannot be another "150,000 coins stolen / robbed " every 10 minutes....  

think about it.

1 - dude saw 25,000 coins vanish from his desktop
2 - Goxed
3 - polish exchange 17,000 coins
4 - mybitcoin 150,000 coins
---- this list goes on....

I understand hackers...  but what's happening with most of those cases isn't hackers...  it's criminals and thieves...  that's not the same thing...   not even close.

hacking always meant (at least when I grew up) to try to break something... just to see if you can....   and if it turns out to be a security flaw you told the developer before publishing it.  

This?  These are people that steal bitcoins and in essence destroying what they are stealing,  hence they are idiots.

Picture this...  a company builds a program that secures stock transactions on NASDAQ and is listed on the said exchange....   hackers target the company,  and hack their software where they "steal a bunch of shares of it" ... then the criminals try to dump it as everyone else is because their "secure" software isn't so secure.

In a nutshell,  each time they are stealing it it's destroying the very nature of what makes it appealing...  hence destroying it's value.

It's my feeling that these people are not actually motivated by money...  they have a goal.. and that includes destroying bitcoins.

I feel your rage but disagree about the motivation for the theft.  It's mostly about the $ they can make.  Sure, they're dumping and causing the market to fall but it is a 'bird in the hand' issue.  Their 'investment' is the time and expense of stealing the coins, not mining or selling or other legitimate earning.  Plus, if Bitcoin (the market and the algorithm) can't withstand this sort of problem, then fail it should.  After all, we're always going to have thieves and the system must be robust enough to withstand them. 

I like Bitcoin but I haven't bought any.  I'm not motivated to otherwise earn any either.  I simply don't have a warm fuzzy about their security...neither their future utility. 

[malbritten]

The only thing that will kill BTC are the hoarders who sit on more than 500 BTC hoping to just cash out.  Spend your BTC on businesses that will, in turn, encourage more to accept BTC.  If you won't spend it, give it to me and I will.

[lettucebee]

Bitcoin's value is that it is a people's currency, independent of central bankers, decentralized and therefore very hard for the Authorities to attack.  They like to carve up the globe into little farms and prevent Their property (people's money) from moving from one farm to another.  Bitcoin can be very anonymous and ignores farm borders, which makes it a very good option for people who want to move their money off one farm and onto another where they might have a little more pasture.

[Phinnaeus Gage]

the problem is the article is partially correct.  

If we continue down this path of stealing, hacking and robbing each other regarding bitcoins,  it WILL fail.    I spent large amounts of money building flexcoin... I'm betting big that we'll be okay....   but in order for that to happen there cannot be another "150,000 coins stolen / robbed " every 10 minutes....  

think about it.

1 - dude saw 25,000 coins vanish from his desktop
2 - Goxed
3 - polish exchange 17,000 coins
4 - mybitcoin 150,000 coins
---- this list goes on....

I understand hackers...  but what's happening with most of those cases isn't hackers...  it's criminals and thieves...  that's not the same thing...   not even close.

hacking always meant (at least when I grew up) to try to break something... just to see if you can....   and if it turns out to be a security flaw you told the developer before publishing it.  

This?  These are people that steal bitcoins and in essence destroying what they are stealing,  hence they are idiots.

Picture this...  a company builds a program that secures stock transactions on NASDAQ and is listed on the said exchange....   hackers target the company,  and hack their software where they "steal a bunch of shares of it" ... then the criminals try to dump it as everyone else is because their "secure" software isn't so secure.

In a nutshell,  each time they are stealing it it's destroying the very nature of what makes it appealing...  hence destroying it's value.

It's my feeling that these people are not actually motivated by money...  they have a goal.. and that includes destroying bitcoins.

I'm going to read the article after I make two comments. Since I opted to quote "the founder", I state my second comment, first.

In a nutshell,  each time they are stealing it it's destroying the very nature of what makes it appealing...  hence destroying it's value.

Please correct me if my example's incorrect:

I'm a modern artist, and my work is highly sought after. To date, I have created 10 pieces of art that had a fairly high and stable value--until a break-in occurred and two of the artworks were destroyed by people who don't like art. Now there are only 8 of my masterpieces in the world and their value went up because there's fewer works of art with my name on them. Granted, I have more art in the pipeline, therefore seeing the value of those remaining 8 pieces of art worth less when my new art enters the marketplace.

In a nutshell, if there's 7 million bitcoins, and 1 million are destroyed, doesn't that increase the value of the other 6 million?

Comment 2 (before I read the article):

From Wiki: http://en.wikipedia.org/wiki/Forbes

Forbes.com now employs a new slogan – "Information for the World's Business Leaders". According to Forbes.com, the Web site is among the most trusted resources for senior business executives, providing them the real-time reporting, uncompromising commentary, concise analysis, relevant tools and community they need to succeed at work, profit from investing and have fun with the rewards of winning.

My question(s) (although you may have been expecting a comment): Aren't Forbes articles mainly read by investors seeking out places to invest their money? Aren't Bitcoin now on the radar of even more investors due to this article? Aren't some investors favor a downturn in some investments, seeing a future correction because the fundamentals are sound? (Thank god all my high school English teachers aren't around any-more!)

Now, don't bother me while I go and read the article. I sure the hell hope it aren't long, for I have lots of stuff to do.

[Phinnaeus Gage]

SOB! Forbes has Trolls. This enforces the truism that one should read articles before commenting on such, but I feel my comments aren't that badly.

[the founder]

I'm a modern artist, and my work is highly sought after. To date, I have created 10 pieces of art that had a fairly high and stable value--until a break-in occurred and two of the artworks were destroyed by people who don't like art. Now there are only 8 of my masterpieces in the world and their value went up because there's fewer works of art with my name on them. Granted, I have more art in the pipeline, therefore seeing the value of those remaining 8 pieces of art worth less when my new art enters the marketplace.

In a nutshell, if there's 7 million bitcoins, and 1 million are destroyed, doesn't that increase the value of the other 6 million?

That's not what happened... some of those coins (I know for sure Meze Grill in New York) earned them by selling sandwiches....  so the thief came in and stole his hard earned work.    He didn't destroy the coins,  he just gave a big FU to hard work and stole them... and now is dumping them on the market.

I'd be surprised if the grill continues to accept bitcoins if this is allowed to continue.

[flug]

1 - dude saw 25,000 coins vanish from his desktop
2 - Goxed
3 - polish exchange 17,000 coins
4 - mybitcoin 150,000 coins
---- this list goes on....

It's incredible that Bitcoin has kept its value as much as it has given what's happened. Just imagine how strong it will be once the Bitcoin community has sorted its security issues.

To say that Bitcoin is in a deflating bubble is a bit like saying gold's in a deflating bubble if Fort Knox gets raided every other week. (Assuming there's any gold in there)

[wndrbr3d]

Here's all I got from the article:

[indio007]

This what I posted for Mr. Unimaginative at Forbes..


Why do people keep saying that bitcoins have no fundamental value? Is a service a valuable consideration in the law? YES! Even a promise is a valuable consideration.

The bitcoin network and it’s nodes authenticate , verify and reverify a transaction over and over and over. You can’t access the network without bitcoins. They are a right of access. They are a license to use. All valuable considerations.
Third party authentication is obviously a valuable consideration, ask any notary public, clerk of court, or recorder of deed.

[makomk]

I'm a modern artist, and my work is highly sought after. To date, I have created 10 pieces of art that had a fairly high and stable value--until a break-in occurred and two of the artworks were destroyed by people who don't like art. Now there are only 8 of my masterpieces in the world and their value went up because there's fewer works of art with my name on them. Granted, I have more art in the pipeline, therefore seeing the value of those remaining 8 pieces of art worth less when my new art enters the marketplace.

In a nutshell, if there's 7 million bitcoins, and 1 million are destroyed, doesn't that increase the value of the other 6 million?

That depends. If there are 7 million of - for example - a particular brand of washing machine and 1 million of them burst into flames, that obviously makes the remaining 6 million rather less valuable. (Also, most of the bitcoins lost so far have been stolen rather than destroyed, so the number in circulation hasn't decreased that much.) On the one hand you have the decrease in supply, and on the other loss in confidence in Bitcoins as a result of the heists.

[BitVapes]

This what I posted for Mr. Unimaginative at Forbes..


Why do people keep saying that bitcoins have no fundamental value? Is a service a valuable consideration in the law? YES! Even a promise is a valuable consideration.

The bitcoin network and it’s nodes authenticate , verify and reverify a transaction over and over and over. You can’t access the network without bitcoins. They are a right of access. They are a license to use. All valuable considerations.
Third party authentication is obviously a valuable consideration, ask any notary public, clerk of court, or recorder of deed.

nice, I've been struggling to put into words to convey this fundamental value to bitcoin and you accomplished it well.

[Mike Moceri]

The only thing that will kill BTC are the hoarders who sit on more than 500 BTC hoping to just cash out.  Spend your BTC on businesses that will, in turn, encourage more to accept BTC.  If you won't spend it, give it to me and I will.

More particularly, buy drugs off of Silk Road with your BTC. Drugs are a great store of value, they have a long shelf-life, and are easily convertible. You'll be building the bitcoin economy and be able to hoard to your heart's desire!

[the founder]

I'm a modern artist, and my work is highly sought after. To date, I have created 10 pieces of art that had a fairly high and stable value--until a break-in occurred and two of the artworks were destroyed by people who don't like art. Now there are only 8 of my masterpieces in the world and their value went up because there's fewer works of art with my name on them. Granted, I have more art in the pipeline, therefore seeing the value of those remaining 8 pieces of art worth less when my new art enters the marketplace.

In a nutshell, if there's 7 million bitcoins, and 1 million are destroyed, doesn't that increase the value of the other 6 million?

That depends. If there are 7 million of - for example - a particular brand of washing machine and 1 million of them burst into flames, that obviously makes the remaining 6 million rather less valuable. (Also, most of the bitcoins lost so far have been stolen rather than destroyed, so the number in circulation hasn't decreased that much.) On the one hand you have the decrease in supply, and on the other loss in confidence in Bitcoins as a result of the heists.

That's the exact problem...   it can be fixed... and given enough time it will be fixed...  but honestly these criminals have set back bitcoins by at least 6 months,  or longer.

[bitrebel]

Did you expect an article of Praise instead?
The system will beat up on bitcoin every chance it gets.