Bitcoin Value Sinks After Chinese Exchange Move

http://www.nytimes.com/2013/12/19/business/international/china-bitcoin-exchange-ends-renminbi-deposits.html

by mjfern • 13 years ago

83 107 13 years ago

MattyRad• 13 years ago

"It is not issued by a central monetary authority, it does not have the properties of legal currency and it is not a currency in the real meaning of the word."

Certainly an amusing quote, given the extensive actions to stop the spread of such a non-threatening non-currency.

By "ban", I assume they mean "made illegal." The former of course being a euphemism for the latter. A couple questions come to my mind as such.... How will China enforce such a ban? Can China physically or technologically bar access to Bitcoin deposits?

Regardless of the Chinese government's ability to effectively enforce such a ban, the price of Bitcoin has taken a noticeable dive.

ekianjo4• 13 years ago

the price of Bitcoin has taken a noticeable dive.

Don't judge on one day. Wait for a week, 10 days before making conclusions on the price of Bitcoin. Bitcoin has shown to be pretty resilient to news that were considered bad by the media. We'll see.

taspeotis3• 13 years ago

Wait for a week, 10 days before making conclusions on the price of Bitcoin

My conclusion is that it's pretty fucked up [1].

Nov 15 $US430

Nov 22 US$843

Nov 29 US$1137

Dec 6 US$552

Dec 13 US$869

Dec 18 US$584

Pick one of those dates before today and imagine saying "wait for a week ... before making conclusions on the price of Bitcoin".

[1] https://coinbase.com/charts

Fuxy• 13 years ago

China is afraid. Bit-coin is an unregulated way of moving money out of China and they are known for keeping the movement of money in and out of china under very strict control.

The only way of regaining this control is by forcing all major companies to ban bit-coin.

You think the companies are happy about this they were making a very nice profit from the transactions.

seanmcdirmid• 13 years ago

Right. China still has currency controls on the RMB. Makes it a pain for me to move it out of China en masse, not that I've tried yet.

3pt14159• 13 years ago

Bitcoin is spelled without a hyphen.

yongjik• 13 years ago

If you find an ant taking a crumb of bread from under your table you aren't afraid. You're annoyed. Let's not lose perspective here.

baddox2• 13 years ago

It's obviously a matter of controlling the flow of money (or capital in general). I fail to understand how anyone thinks this demonstrates a flaw or shortcoming of Bitcoin.

master_shake2• 13 years ago

In April, I watched the price of bitcoin every day. When it approached $200 I said "f*ck it," took out a student loan and bought in at $225. The VERY NEXT DAY the price collapsed. I watched bitcoin slide to $50 in a state of complete and utter devastation. I felt so stupid. I decided not to sell, and just considered the loan to be a write-off.

Point being, you should assess the quality of your investment in years, not hours. And in regards to the Chinese government, allow me to quote Mahatma Gandhi:

first they ignore you, then they laugh at you, then they fight you, then you win.

grey-area5• 13 years ago

Should a currency be an investment?

greghinch• 13 years ago

Currency speculation is a risky but thriving market

richardw2• 13 years ago

Wrong question, I think. This thing is barely a currency. It has built-in deflation, which makes it a great long-term store of value (assuming it isn't killed somehow) in a world of depreciating alternative stores of value, but a bad currency. If you want a currency for day-to-day use, USD is what you want. If you want to hedge against USD depreciation, BTC is one option.

mattm2• 13 years ago

It doesn't matter if it should or not, it is. As is most other currencies. See how George Soros made his fortune.

oznathan3• 13 years ago

One of the greatest investors of all-time, George Soros, made billions betting against the British Pound. A pretty old currency.

http://www.telegraph.co.uk/finance/2773265/Billionaire-who-b...

raingrove• 13 years ago

speculation != investment

dualogy2• 13 years ago

I keep hearing this but I never see any angle to this statement where it could possibly be true.

ivanplenty2• 13 years ago

There's a few things weird about this story. Are you really proud you have a leveraged position in bitcoin? Isn't that among the riskiest positions you can take on a very volatile, illiquid, and possibly illegal asset? That's totally a personal choice, but it's certainly not one I would or a typical retail investor should ever take. Your decision to buy-and-hold during a sell off in the Spring is at best an anecdote and certainly should not be used as any evidence on what behavior to do now.

Government intervention is just one of a few significant black swans: blocksize changes, verification (i.e. mining) fragmentation (effectively doubles the money supply for each split), and SHA collision attacks becoming practical. None of this should ever happen, right?

However, this line should be clarified in every context:

took out a student loan and bought in at $225.

In the US, this is generally _not OK_. To everyone else in the US, do not read this as a positive example. Do not use student loans for bitcoin or any other investment.

What can I use my federal student loan money for? You may use the money you receive only to pay for education expenses at the school that awarded your loan. Education expenses include such school charges as tuition, room and board, fees, books, supplies, equipment, dependent child care expenses, transportation, and rental or purchase of a personal computer. Talk to someone at the financial aid office at your school if you need more details. [1]

[1] https://studentaid.ed.gov/sites/default/files/your-federal-s...

(Of course you may have been one of the small percentage who took out an unregulated private loan, but the principles behind those are generally the same).

master_shake2• 13 years ago

Thank you captain obvious. I had ABSOLUTELY NO IDEA that using student loans for unauthorized investments is a violation of the contract. Gee willakers! I better go turn myself in!

dualogy2• 13 years ago

Well it WAS kinda "educational" for him, wasn't it? ;)

celticninja4• 13 years ago

i love how you are telling him it was a dumb idea, when you have no idea if he sold enough at $1100 to cover his student loan, or that right now he is still in a position where he has doubled his money in a matter of months regardless of this crash.

Too many people offering investment advice in hindsight round here.

altoz• 13 years ago

Please spare us the lecture on what an investor should and should not do. What someone does with their money is their choice and the consequences of what happens with that money is their consequence.

sambeau• 13 years ago

It's also illegal in the UK to reinvest your student loan.

Update: I can't find a link to back this statement up and at least one UK Bank (Barclays) seems to encourage it. My evidence is therefore purely anecdotal — I remember it being noted in the terms at the time.

confluence• 13 years ago

In 08' pension funds got wiped out. They felt so stupid. They decided not to sell, and just considered their loans a write-off. They stayed written off. You should assess the quality of your investment in utility, not years. And in regards to Bitcoin, allow me to quote myself

Everything goes up in price, until it doesn't.

harvestmoon• 13 years ago

Reminds me of the reassuring heart surgeon saying:

"The bleeding always stops."

gruseom• 13 years ago

allow me to quote Mahatma Gandhi

Gandhi never said the "first they ignore you" thing. It's been traced back to a speech by a union activist in 1912 or so. Lots of previous discussion about this on HN.

Greed• 13 years ago

I'd like to point out that, as an early adopter, it really pains me when I see people using situations like this to argue for the viability of Bitcoin as a currency.

Bitcoin is going to succeed because anecdotally you risked far more than was responsible on a winning gamble?

Prices don't just increase inexhaustibly. Bitcoin isn't going to 'win' if the only value it has is that people can wake up to find their investment multiplied overnight. These are the elements of a ponzi scheme, and you shouldn't argue for its success because of your kitschy miracle story.

fsckin2• 13 years ago

After the peak of $1100 and being pretty happy last week, and the subsequent decline, I sold my stash at $800 last week, no regrets.... yet.

Probably a great time to buy.

SamReidHughes• 13 years ago

Probably a great time to buy.

Why?

ivanplenty2• 13 years ago

Probably a great time to buy.

He or others like him may not have sold off all of their coins and need dumb money to keep the price afloat just a little longer...

If it were a great time to buy, he would have. Follow the actions and not the words in markets like this.

sickpig• 13 years ago

He thinks that the price is near or at the bottom, I suppose.

smtddr• 13 years ago

It's possible, but not too likely at all at this point, that China will reverse this decision. I don't know how far BTC will fall, but let me tell you this. If it falls to under $10 like this person[1] says, I'm going all in... $5,000 USD's worth because I'm a fool. If, by some improbable & unfeasible way, China does reverse and BTC reaches $1,000+ again my cheers will be so loud that everyone on HN will actually hear me.

1. http://www.businessinsider.com/williams-bitcoin-meltdown-10-...

killerpopiller• 13 years ago

I came here for some opinions on where the dive ends.

Will we see the BT under 200$?

tlrobinson2• 13 years ago

Comparison to previous bubbles (with standard disclaimer about past performance not being an indicator of future results): http://m.imgur.com/i5w3yPj

$200 is certainly possible, if not likely.

forgotmycreds2• 13 years ago

If you look long enough you can see the end of all things.

Bitcoins, I as an outsider have to say that many people will be tempted to buy because of the low price. This low price is being advertised by lots of people as a reason to buy, probably trying to mask the news of China not allowing the business. What big economy has accepted bitcoin as a currency? Edit: What reason is there to be optimistic about the bitcoins.

jasonlingx2• 13 years ago

Wow, this has really got the attention of the Chinese authorities. This only alludes to how incredibly disruptive bitcoin is going to be. Time to go all-in if you haven't already...

jaibot3• 13 years ago

Time to go all-in if you haven't already...

If every possible outcome confirms your hypothesis, you are not considering the evidence properly. If China hadn't moved against Bitcoin, would you think that would make Bitcoin a less attractive speculation?

celticninja4• 13 years ago

going all in is probably not adviseable in any technology investment, but I get his point, the Chinese Government see bitcoin as a way that its citizens can circumvent currency controls and it also affects the exchange rate of the RMB, which is very closely controlled byt he Chinese Government. This doesnt mean that bitcoin is "going to the moon" this means that as a disruptive technology it is making itself known and coming up against predictable barriers.

The comment you responded to was a bit "buy buy buy" but the sentiment is just another way of saying "first they ignore you, then they laugh at you, then they fight you, then you win"

jasonlingx2• 13 years ago

If China hadn't moved against Bitcoin, would you think that would make Bitcoin a less attractive speculation?

Yes. Didn't I just say that?

hessenwolf• 13 years ago

Not sure if you are being ironic. Regardless of the merits or lack thereof, it would be nice to be able to have an intelligent discussion online about Bitcoins, without being clusterbombed by the army of shills and speculators.

dgregd• 13 years ago

Time to go all-in if you haven't already...

I can calculate the movement of the stars, but not the madness of men Sir Isaac Newton

erdoserdoserdos• 13 years ago

Unregulated capital flight is really not a feature of Bitcoin.

Bitcoin is money with the ledger built into it. It's not for hiding wealth, but for tracking it. This is a market correction that had to take place.

People get confused right now because the ledger is more or less blank. It won't be. (As a slightly dystopian side note, BTC with very little history may become very very valuable.)

In the future, it is going to be preferable to pay for anything large with cryptocurrency. It's overkill to buy a coffee with Bitcoin. But a house, a car, maybe even rent? What better way to prove you own or have paid for something? The currency knows when and how it was used.

We currently live in a world where banks try to foreclose on homes that aren't even mortgaged. Bitcoin and the like will end that. But even more importantly, Bitcoin is about wealth protection. The average Joe will have very little of the deflationary income. But large banking institutions will.

lukifer3• 13 years ago

Altcoins with faster transaction times and built-in inflation formulas could change the game. I'm bullish on crypto-currency in general, but I don't think it's a given that BitCoin is guaranteed to be the winner, long-long-term.

BTC with very little history may become very very valuable.

Unpack this? I had thought that if you sent coins to a fresh wallet ID, it becomes effectively anonymous. (I've heard of some who generate a new public key for every transaction.)

Anderkent• 13 years ago

Unpack this? I had thought that if you sent coins to a fresh wallet ID, it becomes effectively anonymous.

Not really, you can see where the money came from, and assume the same owner (or a relationship between the owners).

To anonymize bitcoins you have to 'mix' them - take X bitcoins from N people, send them to a single address, then send X to new addresses for each of the N people. Because any persons bitcoins might end up going to someone else, you cannot assume it's the same person or a transaction any more.

btbuildem• 13 years ago

BTC with very little history may become very very valuable

Why would a virgin coin be more valuable than one that has passed through countless wallets? What is the advantage?

gamblor9562• 13 years ago

We currently live in a world where banks try to foreclose on homes that aren't even mortgaged. Bitcoin and the like will end that.

No, it won't. The problem was never proof of payment. The problem in almost all cases was proving ownership (by the foreclosing bank) of the ownership of the mortgage/loan, which Bitcoin can't and won't solve because it's not something that can be put into the Bitcoin protocol or software. (The bank you take out a mortgage from is rarely the bank that you end up making payments to; the original bank usually sells your mortgage to another financial institution willing to accept the credit risk.)

But even more importantly, Bitcoin is about wealth protection. The average Joe will have very little of the deflationary income. But large banking institutions will.

Why is this a good thing? You've basically just said that the rich will just get richer and the average Joe will, in relative terms, will become even poorer (as prices increase to keep pace with the increasing wealth of the rich).

adrianwaj• 13 years ago

"BTC with very little history may become very very valuable"

Perhaps, but I think that's why some degree of drug site users.. according to my readings, prefer litecoins. (just not sure how important of a feature ltc is, but it seems to be at least quite important to some)

The value is in having exchanges with little history, and having viable altchains that people can buy into and sell out of.

jackgavigan• 13 years ago

Predictable outcome is predictable: https://news.ycombinator.com/item?id=6818821

Anyone who thought the Chinese government were going to ignore a mechanism that allowed people to bypass capital controls with impunity was pretty naive.

Bitcoin fanboys have classic tunnel vision - they're so enamoured of the libertarian ideal of an anonymous crypto-currency that's not controlled by any government, that they ignored all the practical, economic and legal challenges it would need to overcome before it could become a real currency.

It's a bit like the people who watched the moon landings on TV and believed that we'd have moonbases by the end of the 20th century. Technology needs time to develop and mature, and there typically needs to be a compelling commercial case for its adoption.

The technological principles that underpin Bitcoin will see more widespread adoption within the next few years but they'll be deployed within the pre-existing financial context, perhaps as a mechanism for OTC trading or to support real-time gross settlement in the wholesale markets. In the retail market, I envisage an M-Pesa-style digital payments/money-transfer solution that complements the the traditional banking and payments systems. We might see alternative currencies built on Bitcoin-style infrastructures but based on something that people value in a different way from dollars and cents (e.g. the rainforest).

But Bitcoin itself is too flawed from an economic perspective, too inefficient and too big a step to be able to function effectively as a currency within the current AML/sanctions-focused regulatory environment.

johndevor• 13 years ago

I think the comparison to moon bases is a little dramatic. The infrastructure exists already for Bitcoin, and there is a thriving Bitcoin ecosystem. Whether or not it continues to grow is the question.

oznathan3• 13 years ago

Indeed it's predictable that if the biggest buyer stops buying the prices will drop. You don't have to be a genius to figure that out.

The adoption of p2p technology, a protocol or a network has less to do with the quality of the technology itself, and more with the size of the network. Couldn't there be a better social network than FB? A better snapchat? A better Twitter? A better protocol than http?

Besides, too flawed from an economic perspective? Too inefficient? This is the rhetorical equivalent of "Spray and Pray"..

The current regulatory environment will not just disappear but itself. Bitcoin might win, bitcoin might lose, but there will be blood.

vectorpush2• 13 years ago

I am always amazed by the condescending tone of know it all speculators who think they've got it all figured it out. Labeling bitcoin enthusiasts as fanboys is a trite rhetorical tactic to marginalize their opinions, but what's really hilarious is that your tense (they ignored all challenges, an obvious falsehood btw) seems to imply that you've somehow definitively demonstrated that bitcoin is destined for failure. Guess what? Bitcoin was chugging along just fine before the Chinese hit the scene, in fact, black market merchants had no problem accepting bitcoin as their primary source of payment long before the financial world had even heard of bitcoin. I applaud your risky predictions though (bitcoin will fail, the price will drop if a government clamps down on bitcoin, bitcoin technology will be used in future financial systems), truly marked insight, you should recommend a reading list.

Anyway, I expect you to headline the inevitable "Bitcoin Once Again Breaks 1k" thread with a post linking to your comment here, explaining why you were full of shit... Though, I won't hold my breath since intelligent individuals like yourself will always find a reason to consider bitcoin a failure until its adopted as legal tender (something that the "fanboys" realize is completely unnecessary for the success of bitcoin).

kordless3• 13 years ago

Blaming statements are pretty easy to spot if you know the signposts for them. Indicating a current outcome is 'predictable' because you said it was going to happen is a form of confirmation bias. Making a self referential comment to bolster his opinion sets the tone for the rest of the blaming argument that follows. Also, there the fact he didn't actually publicly call it first: https://news.ycombinator.com/item?id=6818680.

As you point out, the terms 'fanboy', 'tunnel vision' and 'libertarian' can be tactics to market a particular opinion. Ad hominem arguments are always a good indication someone is making blaming statements. I'm personally enamored with the fact that cryptocurrencies instantiate trust at their core because trust is important to me. That's not necessarily a libertarian viewpoint, so clumping me in with a group of libertarians effectively blames me for something that I'm not guilty of. FWIW, I don't have a beef with Libertarians, and may be one for all I know.

BTW, making a coy remark about his 'intelligence' and speaking for his future actions are blaming statements in themselves. It isn't helping the conversation much by doing that.

ye• 13 years ago

China is a big player, but it's just one of many.

But even China can't stop bitcoin from being used in China. They just made it harder, that's all.

Bitcoin keeps getting adopted, the infrastructure is getting built, better software is being written. Whether you like it or not, it's getting more popular, that's just a fact.

I predict it will take Western Union and Money Gram and many smaller money transferers out of business in a few years. I'm sort-of confident it will take a significant portion of Paypal's business as well.

erikpukinskis• 13 years ago

In some sense, I think the opposite. Bitcoin will succeed everywhere that PayPal and MoneyGram currently are failing. I suspect Bitcoin will replace a lot of cash and "valuables".

It may someday replace more "developed nations"/consumer-facing stuff like PayPal, but that will be a slow, politicized process fought in the arena of public sentiment. It will spread like wildfire in the arenas where there is currently no good means of transfer.

kordless3• 13 years ago

My tendency is to not agree with you, mostly due to your tone - see my note to vectorpush below for clarification.

Regardless, I hear you in that there challenges to be overcome to effect wide-spread adoption of this technology platform into the current financial markets. There is always a constant challenge in architecting, securing and operating financial networks. Innovation in these areas never stops, and it is unreasonable to assume we're going to adopt something long term that is insecure or outright broken. We are driven by trust, greed and fear, after all. I don't trust you and I think you are going to steal my money. I love my money, so I will take measures to protect it long-term.

Bitcoin is complex, and I've observed people having difficulty digesting the details on how it works. One thing of value that appears to be overlooked is the fact that Bitcoin is being secured by individuals (miners) putting power into the system. That power is used to compute the encryption used to secure the coins. Some have put the time to crack a single bitcoin key at 82 billion years.

The fact that Bitcoin is secured via power put into the system, currently around 7 quadrillion hashes per second, needs to be considered when discussing adoption trends. The value brought to this market by that computing power cannot be ignored.

It is, to put it succinctly, a platform of trust powered by the most massive compute engine humanity has ever built.

Eleopteryx• 13 years ago

I feel that the moon bases analogy is incredibly unfair. Bitcoin's utility has already been demonstrated, and, through that, the utility of decentralized digital currency in general. The remaining question isn't so much the long-term viability of this model as much as it is how far can it go?

Comparing it to the notion of a "moon base" is extreme on multiple levels, I guess one of them being that the actual demand for such is clearly minimal where as Bitcoin's adoption continues.

Bitcoin being banned by someone somewhere was a wholly inevitable and arguably necessary outcome. The positive spin on this news is that Bitcoin is on the radar at all to even be banned by anyone to begin with.

bonbon• 13 years ago

""they ignored all the practical, economic and legal challenges it would need to overcome before it could become a real currency""

Bitcoin is born liberated and will continue to, irrespective of governments giving their stance. What else would a 'fanboy' expect from established players?

baddox2• 13 years ago

Why are you patting yourself on the back for one of the most obvious predictions imaginable? What's next, a brilliant prediction that if the US government bans electric cars, Tesla's stock will crash?

spearso• 13 years ago

Dreamers will dream, the grounded will copy and implement the best of their ideas, and some people will just look for something to claim is broken and stupid and pointless and doomed.

scotty79• 13 years ago

Awesome. I have a little regret that I wasn't brave enough to sell at $1000. But then I'd have to decide when to buy and I'd probably chicken out and already buy for something like 800$. And I'd be risking the scenario I'm most afraid of that I get stuck without bitcoins and I can buy much less of them because the prize never goes below for what I sold them.

Bitcoin Value Sinks After Chinese Exchange Move

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