Bitcoin Exchange Scam – Bitcoins Are Now Worthless
After considerable thought, I’ve decided to put the Bitcoin Exchange Scammer comment back up as I believe it’s in the public interest, especially so given recent events on Bitcoin Exchanges. For those unaware, every now and then, I receive a … Continue reading
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I politely disagree. You get some spam mail by some two-bit con-artist and you think that reflects bitcoin as a whole?
Are there a lot of scammers targetting bitcoin right now? Yes, but there are also a lot of scammers asking you to send them 200 thousand dollars to unfreeze their rich uncle’s bank account in Switzerland.
Case closed?.
Given this, and what’s been happening with other Bitcoin exchanges recently, I’m left with a significant amount of doubt as to how well these exchanges, which Bitcoin depends on more than we’d like to admit, are run. Would you really think they exist for your benefit or to enrich the owners while the going is good? Two weeks ago, I’d have supported the plausability of your argument, but not now. Not after all this.
If you think for one minute that an individual would run a Bitcoin Exchange as a full time concern for the “public good” I’d be interested to hear your opinion on why.
How well was certain banks run in USA? Remember 2008?.
My question is, how many alternatives will arise? Will we see ebaycoin, etc? That in itself would dilute bitcoin valuation?.
I agree. The eventual dilution of the “anonymous currency” market will be a result of many competing products. But in a situation where the top anon currency is a major target for law enforcement, the dynamics will be very interesting to watch. I say it will turn out like file download sites (similar proposition in that it is a not-legal service plus anonymous users). Each group of users will have their own set of favorites, with much overlap, but no real “winner”. In this way, enforcement will lack the massive market share leader to target for a media backed takedown campaign. Resulting in success for (pseudo) anonymous currencies overall, but a failure of Bitcoins intended market domination.
Who exactly “intended” market domination with bitcoin?.
The intention of Bitcoin is to become the defacto global anonymous currency.
Why else do you think it was created?.
Seriously, I don’t think that the creator of BitCoin thought to himself: “Hey, there are these highly non-trivial ideas, lets combine them in an ingenious way to create the first anonymous peer-to-peer transaction system in order to dominate the world of anonymous currencies.”
Give me a break. It’s far more likely that he just did it because HE COULD, and he wanted to see how it pans out.
NERD can u tell us which currency is secure and risk free with all the cheks and balences. Maybe if their is a single curruncy that is asset backed your argument is solid. My personal belief is that most currencies value is based on perseption and a given set of circumstances (what happens when their is unexpected change) eg the price of oil or Greece today currency becomes valules when based on future revenue that does not happen. In a sitution any independent investment option would reduce risk, inflation and probably create some deflationary presure giving us some space while placing economies under pressure to correct. It may be that BITCOIN may be the seed of a universal unit of exchange. With regards comman use if used the same way as your cash the risk is limited and similer. With regards use by criminal factions it would be much more traceable than cash further in the conversion it would require banking support. The main losers being the banks impossible profit margins being made realistic and government revenue and fiscal control forced to be people friendly. All this said Nerd you are right BITCOIN is high risk so be carefull.
Just wanted to point out a minor correction. Your reference the FTSE 100 and DAX as exchanges, when in fact they are stock indexes. The FTSE 100 tracks the performance of 100 companies that list on the London Stock Exchange (LSE). The DAX tracks 30 companies on the Frankfurt Stock Exchange.
You betray a horrendous lack of understanding about what an exchange does.
There is no number to just increase and people give you that higher amount. The exchange is a place where buyers are introduced to sellers. If the exchange increased a number as your anonymous emailer claims, he would have to provide the other half of the trade to those that accepted. I.E. Dollars or bitcoins. Both of which can be transferred out.
No. The exchange is doing the most sensible thing: sitting between the buyers and sellers and taking a cut. The exchange is literally raking money in on a daily basis, without any need to run a scam of this sort.
Not quite. You can make 1% in transaction fee or you can make 1000x more by controlling price. Further, it has been mentioned on the Bitcoin forums that the exchange markets are not direct seller to buyer markets, since it is possible to reverse a day of trades when the market crashed this weekend. This collapses your argument. Lastly, the owner of the exchange always controls the price. It is the acceptability of the price that leads buyers and sellers to exist at the same time for the same price, and that is reliant upon, in the case of Bitcoin at least, greed.
One cannot argue with the possibility that such market manipulation, since it can exist and be advantagous, will exist. Whether it exists right now or not, well, I believe it does from what I read in the scammers comment. You may disagree, but the fact remains, we cannot know for certain and so taking a firm position on the subject of market manipulation is mere irrational conjecture.
All we know is that it IS technically possible, IS profitable, and that a Bitcoin Exchange owner can manipulate pricing and not be caught if they so desired.
The final decision is left to you.
First off I do not agree with exchanges or banks…they both need to go away. I find it hilarious every time one of them gets hacked. What you argue about an exchange owner of bitcoin raising the exchange rate by 5 cents to make a profit is nothing illegal. Gas stations do the same thing, they value their gas at what price they want, that’s why gas 2 miles down the road can cost 20 cents more or less. A farmers market will value their produce at insanely higher prices then walmart because of higher quality. Furthermore, people that sell bitcoin on Ebay have significantly different values then exchanges. I’ve seen 1 BTC sell as high $30 and the exchange rate as at $11. The real issue here is not the worth of bitcoins but the cost of exchange to cash. Clearly the answer is to eliminate the need to exchange to cash entirely and earn wages with bitcoin and buy goods and services directly with bitcoin. Perhaps you can write an article describing in great detail what jobs you can work for that pay in bitcoin and and list ways one would use their bitcoins to pay for food, housing, internet, etc. This would be more beneficial to people then stirring a pot of rumors and crying wolf about the exchanges.
No, there’s no number to “change”. You really don’t understand. An exchange is just a big pile of buy orders and a big pile of sell orders. When one is met, exchange is done.
The few hours could be reverted by MtGox only because the transactions are recorded and that, as long as the user didn’t withdraw their money, you can revert a transaction (just like you bank or VISA can do).
I’m sorry but not laughing at this email is simply a demonstration that you don’t understand the thing. But don’t be sad, it seems to be a common misunderstanding. Some asked the price that MtGox will set on reopening. Just like MtGox had anything they can do. They cleared all the orders and opening will start at the first agreed exchange.
Now, in theory, it is indeed possible for an exchange owner to slightly move the price by inputting fake transactions. But this is very complex and would not move the market easily.
I disagree Ploum.
I think your expectation and hope for what a Bitcoin Exchange is and the reality are quite different. The orders can be rolled back because no Bitcoins were exchanged in the transaction. You need to clear your understanding of what the exchange is at a fundamental level. It is a place to exchange dollars for Bitcoins. Maybe those Bitcoins belong to other users, or maybe to the exchange owner. The method suggested in the article on may use to “win big” is to crash the market, buy up many Bitcoins, then sell them after reinaflating the market price. What I am saying is the market owners is the other side of the transaction, not, as you imagine, other users.
Sorry, but your argument lacks substance.
First: why would a guy, who profits so much from manipulation, ever reveal such a “fraud” and thus destroy his income base. This could be astroturfing after all.
Second: “overcharging” or selling sthg at higher price than “fair value” is just an artifact of insufficient market transparency, lack of market depth, or information asymmetry. All this things can only be healed by intensive competition – a situation that is definitely not existing for “real” currencies. Although perfect competition is not guaranteed for bitcoing, there it least it might happen.
1 – I cannot mind read the intention of the author. All I know is, as far as I can tell, he has not returned to provide further details. He might have just wanted to lift the weight from his shoulders. Guilt can be overbearing at times, especially after a few drinks.
2 – Market effectiveness only occurs when their are opposing forces acting upon it. With Bitcoin, everyone has a strong financial interest in increasing the price per Bitcoin unit. Hence, having multiple Bitcoin exchanges only drives the market price HIGHER rather than providing an effective counter weight to its progression.
“He might have just wanted to lift the weight from his shoulders. Guilt can be overbearing at times, especially after a few drinks.”
Seriously?
“It is a miracle like I have a bank haha. I give them numbers and they give me money. I thank god everyday.”
“They are greedy. I don’t care if I cheated them. I wonder is it bad? I have a nice life now and will marry soon. We will buy our first house soon with my Bitcoi money the greedy have gave me.
I am blessed to be alive.”
Does that sound like someone racked with guilt to you?
It’s plain as day that noone in their right mind enjoying this kind of income (“my own bank haha”) would endanger that income. He would also be mad to advertise something like this to the world, which includes a bunch of clever hackers and lawsuit happy investors with detectives on the payroll.
This is either someone hoping to temporarily drive down the price, maybe for the lulz, or someone with a vested interest in seeing an unregulated cryptocurrency fail.
Regardless, the exchanges have little to do with the Bitcoin system, which will survive this and probably many coming attacks. Strictly speaking exchanges are not necessary, without them the economy will grow more steadily on the basis of real value trades (goods), without false hype and scared detractors.
Real value trade requires reduced volatility. That’s not going to happen if the exchanges (effectively the market makers now) are without regulation and the greedy hoard the Bitcoins (remember, the limited supply is one of the USPs of Bitcoin).
To put it simply, Bitcoin are worthless.
They have no value other than that which the market pegs them at. A market driven by greed will only peg them higher each day, until the fear hits, then it all comes crashing down as we saw this past weekend.
This will happen again, as you know.
“This will happen again, as you know.”
Of course it will. It’s not meant to be used as an investment vehicle and the greedy will get burned. Some lucky people will get rich. Some scammers too. It doesn’t matter, unless you are one of them. None of this stops merchants from using it right now, who can limit their risk by using dynamic pricing using exchange APIs and automatically trading as soon as the sale is concluded. Large accounts can probably work out better deals for guaranteed prices on the exchange. Merchants will actually save money because the exchanges have a very low markup (e.G. 0.25-0.75%) compared to other means of payment like CC, there is no possibility for chargeback or fraudulent payments, no Paypal like ‘always believe buyer regardless of sellers reputation’ protection, the system being nearly instant worldwide etc. The same goes for buyers, no or very low transfer fees, instant payment, no hassle with middleman anywhere in the world.
“A market driven by greed will only peg them higher each day, until the fear hits, then it all comes crashing down as we saw this past weekend.”
So how is that different from any stock, bond, precious metals etc. Market? All classical exchanges are driven by greed. Have they never come crashing down? You know they will keep doing that too. Sometimes it’s called capitalism, sometimes it’s theft on a massive scale blanketed in nebulous concepts like Quantitative Easing.
Bitcoins definitely do have value. Their true value is the size of the economy using them. This is currently quite small, so the price on the exchanges is way overvalued, mostly because of speculation.
At which point these two will reach parity I cannot say, but the concept is sound.
The Bitcoin system has value if you are able to look beyond the hype, attacks, price movements, even current specific implementation. It’s not just valuable as a tool for stability in the long run, the cutting of the middlemen and undesirable government meddling, but also as a proof of concept. We now know that this can be done and that there are a lot of people very interested in it, not just for the potential short term gains.
If the current implementation turns out to be inadequate, or the deflationary model needs to be tuned or whatever, noone stops you from forking the code, it’s open source. Multiple versions serving multiple markets could coexist. It also isn’t necessarily aimed at replacing all classical fiat money, gold, whatever. It only needs enough merchants using it to be a valuable alternative. Even if the mail you quote is legit, which I highly doubt, at some point enough exchanges will exist to keep eachother honest. There are enough statisticians watching to notice anomalies. At some further point exchanges will no longer be strictly necessary because of market size.
The greedy is all Bitcoin has. The “currency” has no real value, other than its anonymity, which doesn’t exist in reality as I covered in a previous article on Shutting Down Bitcoin.
“there is no possibility for chargeback” – This is why I will never use Bitcoin to pay for anything. Donations, yes, maybe, but payment for a real good sent via mail? Only an idiot or a criminal, with more to lose than by using the “normal” method woud do that.
“no Paypal like ‘always believe buyer regardless of sellers reputation’ protection” – This again does not help me if I am a buyer. Why would I take a weaker position so you, as the seller, can take an advantageous one? Of course, no buyer will ever do this.
“very low markup (e.G. 0.25-0.75%) compared to other means of payment like CC” – This does not help the buyer at all.
So, as a buyer and adding the volatility into the equation, I am left wondering: why should I ever use Bitcoin to buy your product. Tell me, would you use Bitcoin over Paypal as a buyer? As a seller, I would only accept what my buyers are happy to pay with. I don’t charge for my products in tomatos because my buyers do not use tomatos as a currency.
Stock, bond and commodity markets have measures in place to prevent market crashes. Their prices are based, at least in part, on real value those products provide. They have something tangible behind their price in addition to any manipulation. Would it make any difference at all if the daily Bitcoin price was just a random number? I suggest not.
At the end of the day, the only force on Bitcoins price is up. There is no down force, since all owners of Bitcoin gain by price increases. The number of exchanges becomes a non-issue in Bitcoins case because of this. Eventual collusion will result between the Bitcoin Exchange market leaders due to lack of regulation and price control. Anyonymity has its pros yes, but do not forget about its cons.
Your comment is full of hope for the future. Based on this, I’d assume you have a holding of Bitcoins, correct?. Why do you have them? Do you seek to sell them for a profit some day? I would guess so. Would you still keep them if the exchange rate stagnated for a year? I guess not. And therein lies the truth behind the perceieved worth of a Bitcoin.
“The “currency” has no real value”
Repeat something often enough and it becomes true? Anonymity aspect is misunderstood: everyone can generate new Bitcoin addresses, which are completely anonymous, they are just a very long string of seemingly random letters and numbers (a hash). If you want to do a transaction, you give this ‘address’ to the counterparty. They send out a transaction to this address over the network. The transaction is recorded in a public logfile. But all that is recorded is two meaningless addresses and balances between them. Noone can know who an address belongs to, unless you tell them (by reusing it on a site that requires ID for example, but you can generate new addresses for every transaction if you want). Noone can know what IP address a Bitcoin address is associated with except the few nodes in the Bitcoin network you connect to, and if you use something like TOR, noone can know, period. In other words, you are anonymous, if you know what you are doing, and almost completely anonymous if you don’t. This is true up until a transaction is classified top priority by a heavyweight like the NSA and they throw their considerable might behind it, which means world wide deep packet inspection. This is exceedingly unlikely because it costs a ton of money, they really won’t care about some pot you like to order online. So technically yeah, *they* can connect the dots, but not even a well organized hacktivist collective, let alone a jealous husband.
““there is no possibility for chargeback” – This is why I will never use Bitcoin to pay for anything. Donations, yes, maybe, but payment for a real good sent via mail? Only an idiot or a criminal, with more to lose than by using the “normal” method woud do that.”
You may not be aware of this but entire countries are using exactly this system, for example iDEAL in the Netherlands, which is an electronic payment method that most of the major Dutch banks are using for web commerce since 2006. No chargebacks possible. Millions of Dutch are happily using it to full satisfaction. Are they all idiots and criminals?
“no Paypal like buyer protection – This again does not help me if I am a buyer.”
But it does. If a seller isn’t constantly fighting fraudulent chargebacks, frozen accounts and time wasted on this, they can lower the price of the goods and offer better service. That’s exactly why CC is relatively expensive, they factor fraud into the prices. With Bitcoin there is no need to distrust the customer, all payments are unforgeable and final. Paypal’s fraud department costs a lot of money too. They roll that into the fees they charge to merchants, who roll it into prices to the customer. No longer with Bitcoin. This will also make merchants pay *better* attention to their reputation, because their image now becomes actually important with this system, not like with Paypal who simply don’t care. Win-win.
““very low markup (e.G. 0.25-0.75%) compared to other means of payment like CC” – This does not help the buyer at all.”
Again, it very much does. Those markups go back into the price of the goods. Lower markups, lower prices. Also, the buyer has no exchange markups, only transaction cost, which can be zero. The current default is 0.0001 BTC (~0.0015 USD), but it’s optional (no difference yet for decades). In the Paypal equivalent both sender and recipient pay a sizeable percentage markup. Which goes back into the price of the good. So yes, it does matter, the difference could be something like 4-5% overall, depending on amount and medium.
“So, as a buyer and adding the volatility into the equation, I am left wondering: why should I ever use Bitcoin to buy your product.”
Volatility for the merchant does not have to be an issue, see above. For the buyer it may be until the economy size increases, but in general Bitcoin should be deflationary, so holding BTC over the medium to long term should not have to be an issue, unless of course the whole system tanks. If you don’t trust it, sell on the various markets until you need it, then buy. Even with the dual exchange markup it’s still cheaper than using CC or Paypal. Re rest: cheaper, faster, no middlemen with agendas.
“Tell me, would you use Bitcoin over Paypal as a buyer?”
I think you know the answer to that one. Lots of people are tired of Paypal’s practices, paranoia, frozen accounts and all the associated hassle.
“As a seller, I would only accept what my buyers are happy to pay with.”
Since payment with Bitcoin is painless, I think most people will be happy with it once it’s out of the experimental phase.
“I don’t charge for my products in tomatos because my buyers do not use tomatos as a currency.”
Apples and.. Tomatos. Bitcoin has been designed as a currency, tomatos as pizza topping.
“Stock, bond and commodity markets have measures in place to prevent market crashes.”
I guess that’s why there has never ever been a stock market crash, or tulips are still priceless.
“Their prices are based, at least in part, on real value those products provide.”
I posit that the magical mystery wand the Federal Reserve waves every time they print up another trillion has no backing in fact or fiction. Except the full faith and trust of the nation, which will last until the bubble bursts. In Greece it’s getting awfully close.
“Would it make any difference at all if the daily Bitcoin price was just a random number? I suggest not.”
That’s just facetious. You would only be right once there is no need for exchange, i.E. With a large enough economy which can circulate just Bitcoin for goods internally, which will not be the case for many years to come. I do not argue that Bitcoin is not mature yet. It has many challenges ahead. Discounting it based on its current state is however a mistake.
“At the end of the day, the only force on Bitcoins price is up. There is no down force, since all owners of Bitcoin gain by price increases.”
Not necessarily. While the long term Bitcoin concept limits supply and prevents arbitrary inflation by fiat, it can in fact inflate if the economy shrinks. Or if trust, expectations etc. Diminish, which can readily happen today, but much less so in the long term. The current exchange rate is too high, speculative. So it should experience inflation in the sense of either the economy catching up and perhaps overtaking it, or the price going down to more realistic levels. Also, mining new coins is theoretically inflationary, but this effect decreases over time and probably does not keep in step with the growth of the economy resulting in deflation anyway.
“Eventual collusion will result between the Bitcoin Exchange market leaders due to lack of regulation and price control.”
There is no guarantee exchanges are not going to be regulated. In fact the Bitcoin developers advocate regulation – of the exchanges. In the end everything can be regulated, but due tot he decentralized nature of the system, it needs the participants’ consent. You must see the exchanges as separate entities on top of the concept, necessary evils if you will. If you are cynical than sure, none of this will work, because not only will everyone collude to pervert the system but you should already be aware that the regulators don’t want it to succeed to begin with. We shall just have to see.
“I’d assume you have a holding of Bitcoins, correct?”
I do not actually have any stake in Bitcoin, either as a developer, in holdings, related business or any other form except for wanting to see it succeed, as a fascinating technological and social experiment with major potential for the benefit of mankind in the long term. Until then, a convenient online payment method for smaller purchases of course.
If I did have any significant holding it would be after the protocol is vetted properly (this will probably be attacked too not too far into the future) and the market and exchanges grew up a bit more. Until then I’m only considering incidental holdings for online purchases.
The same reason why Bradley Manning revealed the naughty government secrets he stole…To brag about it and show off to his buddy’s.
New poster, but bitcoin enthusiast (economics CS major, never have used bitcoin)
Nerd’s argument centers around the idea that the exchange is not just an exchange but also a marketmaker, or counterparty. When you buy or sell, you don’t know who the person on the other side of the transaction is. Furthermore, MtGox takes a portion of every single transaction, buy side and sell side. (Perhaps they act as a counterparty, but it will not be important in this case) If you buy bitcoins, mtgox gets o.65% of the bitcoin. If you sell bitcoins, mtgox gets 0.65% USD.
Over the past month, mtgox has exchanged 50000 bitcoins a day, meaning 25000 BTCs to buyers, the equivalent in USD to sellers. This means that .65%*25000 = 162 bitcoins a day. If you put this out over a year (roughly how long mtgox has operated), thats roughly 60,000 bticoins that MTgox has. Now, why would mtgox want to sit on these bitcoins, when they are liable to be worth nothing at any point. After all its a fiat currency, it’s only valuable if people think they are and can be exchange for goods and services. So, owner floods market with 60000 coins all at once, driving the price down, causing a panic, and buying up more at dirt cheap prices. I’m not saying this is what happened, I’m jsut saying it can.
What happens with this currency is that since no central banks exist, exchanges become the de facto central bank. They take in BTCs per transaction fees. They can flood the market with them or buy them up at will. With only 6.5M in existance, and a 7800% appreciation rate over the past year, it’s really not an unlikely scenario. And, the currency cannot really propogate without the exchanges. If you don’t mine bitcoins, how else will you get them. The exchange becomes the paypal or google checkout that bitcoin tries to get around. Instead of paying a 2-6% commission fee for credit cards, you’re paying a bid-ask spread that is passed to the consumer instead of the vendor. You’re also dealing with currency volatility like no other, quite a deal more risky than a 2% credit card charge.
As for it being a crypto currency, calling people who want bitcoin to be anonymous nefarious or drug traffickers or whatever is baseless. I agree that it is suited for doing such things, but any more so than cash? I think less so. Some people like privacy because they don’t like being tracked, not because they are doing something illegal. I’m a libertarian, I think gov’t should be involved in as little as possible, and I don’t like the idea that they can track my credit card purchases. I don’t like that a credit card company can sell my credit card purchase history to online advertisers who now target my computer with adds for depression medication because I bought prozac, or the number of an abortion clinic because I paid for a pregnancy test.
Furthermore, you’d have to go through an exchange to sell the coins if you were laundering or a drug dealer, and the exchange would log IP addresses, so in effect you could trace where the currency was going to and coming from. Just my 2 btcs.
Correct Dominathan. There is hope yet for our education system. Your clarity of thought is impressive and a breath of fresh air.
As for the nefarious comment. Yes, it is baseless in reality, since of course no direct evidence exists (except the scammers outed on the Bitcoin forums, the virii and malware that are now appearing and the clear use cases of Bitcoin), however, that Bitcoin will attract a criminal element contains significant base in plausibility.
Your cash comment – I can’t easily send you cash over a border. That’s why Bitcoins are ideal for Money launders.
See other comment I made for why you would want anonymity. (you’re likely doing something the society you live in frowns upon).
IP comment – IP is not an indicator of identity. In fact, for anyone with a reasonable grasp of computer security, IP is a negative indicator of identity.
Your cash comment – I can’t easily send you cash over a border. That’s why Bitcoins are ideal for Money launders.
Why on earth would drug launderers trust their earnings to bitcoin if it has no value?.
It doesn’t have real value, but it does have current perceived value. It is stable enough (even given it’s volatility) to go from cash to Bitcoins and back to cash on the other side at a fairly sure exchange rate.
IP is not an indicator of identity, but is an indicator of geography, whcih in turn can help lead to identity.
It can also lead you to a false identification. Case in point being wifi tappers.
Forgot to add,
That letter cannot really happen. Mtgox has thousands of buyers on one side and sellers on the other side. One person cannot jack up the price. Say I put in an order to sell at 20 bucks for a BTCs. There are people selling for $15 a btcs, how have I changed the market. On the other side. I could start buying for a higher price, but then I’m losing dollars for BTCs at a higher price. This is trying to get others to start buying BTCS at higher prices so that the overall price increases. But, this becomes a question of market timing, which as a wall street trader I can tell you is damn near impossible to do. Otherwise, we’d all be rich.
It’s easy to time the market if you own that market. Further, the price of Bitcoin is based in large part on perception. This perception can and is being manipulated for profit by those involved in Bitcoin, since they gain value by doing so. A small increase of a few cents goes unnoticed, or is actively encouraged.
There’s just too much to gain from market manipulation without effective controls in place.
But I think you misunderstand how the exchange system works. It’s a dutch auction, wiki it. The owner of the exchange can’t say “hey, i’ll just raise the price by 0.02 cents and I’ll make more on transaction fees” It can’t work that way. 1) other exchanges are out there, and unless they base their bid-ask price on one exchange, the market (I.E. The number of buyers and sellers who set their own prices) will go somewhere to the lower price.
2) The buyers and sellers will accept the BEST price, the lowest ask and highest bid. If I own an exchange, I can’t just raise the ask a few cents because there are other orders below me at better prices. I can’t change other people’s ask prices on the site because they will know what order they put in and how much money they are getting out. People will start using other exchanges if I do this. Finally I can’t place fake orders because all transactions are timestamped through the p2p network, so orders I put on my website would not show up on the bitcoin network.
What if the Bitcoins exchange owner uses his own site, with his insider knowledge, just as a regular user would (as seller or buyer as the situation warrrants). Would that be plausible?.
Yes, it is plausible, and quite possible. But that doesn’t change the fact that he can’t change the price. The owner of the site doesn’t set the bid-ask spread, it’s a function of supply and demand. I’m not sure what insider knowledge can be gleamed; all users know market depth ( the total amount of buyers at what price and the total amount of sellers at what price), market volume, and pricing.
If he were exclusively the market maker, i.E, he acts a counter party, then yes, he could change the price because he is setting the bid and ask. But, that would require a huge amount of capital and a huge supply of bitcoins (which I guess he could have accumulated from his transaction fees). He cannot be a price setter in a dutch auction system, nor gain an unfair advantage because the information is publicized.
ROTFL at the suckers who bought into the hype on this. Fortunately, it blew up before it grew large enough to inflict real damage, other than wiping out caches of WoW bingo chips.
Bitcoin shows 2 things:
People want to trust a p2p transaction system more than classic banks.
Money is still money to human, and money is subject to scams.
Problems:
Our world is just unreagulating enough for other currencies, so we cqn’t hope for bitcoin to be.
People can be stupid.
Come on people, this article has no merit for one. I have been following bitcoin since they were worth 0 dollars. Bitcoin is a great system, it is a start up business and is going through the same growing pains as any other start up. Bitcoin itself is strong, the exchange system and pricing is mathmatically perfect and is based like a stock is based. It has the qualities of a collectable, a virtual currency and a stock. Yes there is risk, yes it is new, it can be used to buy drugs but so can cash, paypal, credit cards, no difference, yes there will be scams just like craigslist is filled with scams, does that make craigslist a failure, of course not. Your rationale is retarded. The theory and cryptography of bitcoin is awesome and revolutionary, it will thrive and it will be back on the rise when mtgox gets the security system updated and trading will be back around 17 bux a coin. There are other exchanges that were not effected by this and there rate stayed close to the same. Bitcoins difficulty level keeps rising which shows theres is plenty of faith in the process and more people are mining for bitcoins every day. IF everything got hacked, all the negative publicity came out and then the hash rate difficulty was lowering then there would be cause to worry. As long as there are bitcoin supporters, products that can be purchased by bitcoins, echanges for cash for bitcoins and people creating better ideas for bitcoins it will be fine. An ATM machine is being designed right now that you can deposit bitcoins and buy bitcoins at, this is just the beginining of bitcoins, it is not a pyramid scheme, its bad informatoin like this article that leads people in the wrong direction. BUY NOW LOW and SELLL LATER to make some cash DUHHH.
Mike, I love that you set Bitcoins up then drag them back into the gutter with that BUY LOW SELL LATER comment at the end. The value is based on pure greed right now and everyone knows it, including yourself. Possibly, maybe, in the future, Bitcoins or another cryptocurrency will have real tangible value, but that is not today.
This is reminiscent of the dutch tulip craze. They only have value as long as people say they have value. There’s a bill circulating in the senate that will make it illegal to buy and sell bitcoins in the United States or as a US citizen. While it will be hard to shut down the system itself because of how it operates, this will make it difficult for the exchanges to operate. This will in and of itself make it pretty valueless. If the US gov’t says it’s illegal, then merchants won’t accept it, which means its valueless.
Secondly, it’s entirely a deflationary based currency. It”s an immutable supply with conceivably infinite demand. This encourages to do exactly as you say mike, Buy low, hold it, and sell high. This is not a currency, currencies are inflationary because it encourages people to spend them so the economy evolves, not sit on their treasure chest and wait on the next dumbass to buy the dollars at higher prices. It’s ridiculous, the only thing that’s propogating this at the moment is drug exchanges and the rule of the greater fool; you buy it in hopes that someone else will buy it higher. I’m not saying it will crash today, or crash tomorrow, but it will crash.
The bid/ask are created by traders in a *regulated*, non-anonymous market.
The bitcoin markets are both anonymous and unregulated. It is entirely possible the exchange operators are heavily manipulating the prices to their advantage.
Frankly, knowing human nature, it’s beyond “possible” – it’s a near certainty.
And to thwart anyone who wants to say “well that’s just the US gov’t, other gov’ts will allow it” Bailshot. China outlawed virtual currencies 2 years ago, and other countries are going to follow. The main problem is taxes. Gov’ts can’t track it, it’s a libertarians dream, but a federalists worst nightmare. How can you take in revenue as a country when people are using crypto currencies and hiding their money on the computer? It’s ludicrous to think this will last.
It’s called a bubble. Bubbles pop, and when they do they burn the people at the top. This currency is a function of supply and demand. Demand isn’t driven by people buying things from amazon with it. It’s demand because people like Mike think it’s going to rise so they can sell and make a quick buck. Look at the housing market 2006, it’s the same thing. Sell a house, sell the loan, flip the house for more money, sell the loan. It rises until someone realizes its unsustainable, and then everyone sells.
Let me give all of you a little insight into what is “money” and what is NOT “money.” Money has to be a tangible asset and have intrinsic value. In other words, it must be durable, divisible, convenient, consistent, and have value. Bitcoin fails on three of these: durability, consistency, and value. Therefore, it is NOT money. Furthermore, the U.S. Dollar and any other paper currency is NOT money! They are every bit of frivolous as the bitcoin because they are backed by nothing and are worth nothing apart from some kind of government stamp that says they are. A paper currency, just like electronic can go to “0.00.” This means that the only thing that can be real money is gold, silver, or other metals. These have never went “o.00.” I would argue that anything that is a tangible asset can be used as money in a barter system, but cannot necessarily be money. If you think government regulations and central planning is the way to set value on money, I would suggest you read your history. Governments and central bankers have done nothing but transfer wealth away from the middle class and the poor to themselves by currency devaluation and manipulation!.
I also would like to add this to my comments, bitcoin represents something positive. Bitcoin, in my opinion is the beginning of a rejection of the U.S. Dollar and paper currencies as a whole. People are beginning to reject paper currencies and are looking for alternatives ways to find value for their labor! Labor is traded for real tangible assets to accumulate wealth in and is supposed to the right of every man to keep all of the fruits of his labor. No one should be allowed to lay claim to the fruits of one’s labor because they did not work for it! This is especially true of governments and bankers who are leeches and only steal from people who labor. I might want to add some corporations are guilty of this, but not all of them!.
The article is written by an ignorant person closed minded.Sorry but he is arguing for a central exchange for bitcoin.Doesn’t he realise that it was created so we would not be subject to the thieves who run such things as the federal reserve etc?. Yes there is room for an exchange owner to be dishonest but as more and more exchanges come on line people will not buy bitcoins from the thief who adds on to the price to skim money for himself.Bitcoins are extremely secure to transfer for free or nearly free, they are rare and that is why they go up in value.There are many uses not just for greedy crooks. For example millions of poor people pay exorbitant fees to western union to transfer money to their starving relatives.Bitcoin will change all that.Bitcoins have only steadily risen in value and even after mt gox has one of their employyes computer hacked bitcoin is right back up to its price arounf $17.Trust me in a year or two a bitcoin will be well over $1000.
Martin, Do Bitcoin deserve the value of $17? How are they worth that much?.
You tell me, does a pound of copper “deserve” a value of $4?
It’s called the SUBJECTIVE THEORY OF VALUE (Google it), and how much people value Bitcoin compared to how much they value USD sets the price according to the law of supply and demand. I don’t think No. 5 is worth $140 million, I literally can’t since I don’t even have that much money to buy it (if it were for sale). Likewise, you don’t have to think Bitcoin is worth $17, that’s fine, but other people do, and you just won’t move the market as you aren’t the highest bidder.
One can use copper to build things. I’d be interested to hear of anything of real value you have created using a bitcoin.
They did bounce back. Lucky you can wind back the Bitcoin exchange. Every currency has its hicups, look at the US and EURO, they are still unstable. I want free bitcoins.
I’m very sorry but you are very intelligent. The number at a Bitcoin exchange site does not actually represent a particular piece of data, rather it is actually a representation of metadata. You cannot “change the price” just like that. In order to change the price the owner of the site will have to put in massive amounts of buys and or sells which means it will cost him money or BTC once these orders are filled. These sites offer real time data streams and without manipulating the price in this fashion there is simply no way to do it. Bitcoins is representative of a FREE MARKET don’t forget that. Our currencies today are subject to price changes and fixes and bitcoin will never suffer the same demise. With all the new exchanges opening up it will be less and less likely that price manipulation can work.
“We all know Bitcoin is a sham, it’s a pyramid scheme, ”
care to elaborate??? So like if I buy some BTC ( I recently bought 21 BTC for $300 CAD) I have to pay the guys I bought it from a certain amount??? ORRRRR I have to sell them and get more money back…..ORRR???? How is it a pyramid scheme??? Please enlighten us on something that we should “all know”!!! Cause if I wanted to make money the scheme aint working since if I sell my BTC now I will lose money!.
Pask, Please refrain from personal insults.
Imagine this scenario, I own many Bitcoins, now imagine I run a Bitcoin exchange. It would be in my interest to increase the price Bitcoin users think a Bitcoin is worth. THAT is the power I think needs to be understood with the Bitcoin exchanges. And since it can be done without reprisal and brings financial reward, it will be done. That is human nature. Don’t trust Bitcoin Exchanges.
Regarding the Bitcoin pyramid scheme. This refers to the speculative investors involved in Bitcoin (IE. Nearly everyone holding Bitcoins at present). Get in early on a pyramid scheme and you gain, get in late and you gain nothing, get in after the peak and you lose. That is the pyramid scheme game played out in many situations throughout history, and it is clearly happening with Bitcoins. Take a look at the Bitcoin forums for an example, many of the most vocal members who are pushing Bitcoin as a financial transaction medium own Bitcoins themselves. They have a vested interest in seeing the value of Bitcoins increase. Once Bitcoins value begins to drop, they will hold on hoping it increases again, when it does not, they will cash out. This decline phase is well understood in general speculative markets and leads to a market correction, whereby the true value of the underlying asset becomes apparent and the asset, Bitcoin in this case, is then priced at true market.
I look forward to seeing the true value of a Bitcoin, as I believe a single Bitcoin is technically close to worthless other than as a cross border transaction mechanism, for which alternatives will quickly appear once true market value is known. Lastly, I will repeat something I said in my article on shutting down Bitcoin, that is, Bitcoin is not anonymous and we are watching closely.
A question for you, if they Bitcoin value were to drop $1 each day from this day, would you keep your Bitcoins or sell? If you would sell your Bitcoins, at what price would you sell them? If you would hold them forever, why would you hold them? Is it because you think the price will rise eventually or because you have a true use for your Bitcoins?.
If it a scam then why did I make over $1,000 trading coins?.
Because someone else lost $1000.
I think the entire concern is fruitless… Every hear of FIX Protocol? If you haven’t, you’d better start learning.
Wall St is more of a scam than bitcoin…. HOWEVER simply employ fix protocol procedure and messaging with bitcoins and this entire articleisunked and out the window.
Are you serious? Your saying bitcoin is a sham because of a greedy PROFANITY who manipulates the bitcoin prices on his website? How idiotic are people to exchange bitcoins on an un-official bitcoin exchange without double checking the real official bitcoin value? Those are the real idiots and they deserve to go broke by buying bitcoins at a higher price they they really are and go broke. Their fault for being stupid.
Tmcgee, what’s an official Bitcoin exchange? Is there such a thing? Or do you really mean just the most popular exchange…the ones people talk about most on the forums…the exchange websites which show highest on Google? What’s official?
The whole MO of Bitcoin is it’s unregulated. Everything about Bitcoin is unregulated. You don’t know who is running what. There’s no way to know who to trust. Because of this, Bitcoins key strength of anonymity is also it’s key weakness.
The BitCoin ‘exchangers’ thrive on a clandestine promise of a future prosperity to the BitCoin users/holders and the latter wholly rely on the said ‘exchangers’ for monetizing their BitCoins. And when it happens for the ‘exchangers’ to go pop – no hash, no cash. It’s no more than a digital bubble – just like the real estate one we’ve recently had. I’d further call it BitCon for how ridiculous it is. Yet, as an old saying goes, a fool will always find a way to part with his money.
There was a guy in post-Soviet Russia by the name Sergey Mavrody in the early 90s who printed money-like bills with his portraits, started selling them for cash, and was purchasing them back over time for more cash, claiming they have grown in value due to the ever increasing demand for them. Nearly a third of the country invested, with the ‘mavrodki’ (that’s what those bills got to be called) being so widely accepted that they nearly became legal tender. He later admitted to the whole setup being a mere pyramid scheme.
The official market term for Bitcoin is a speculative market. The core requirement for a speculative market is greed. Everyone is looking for a bigger idiot to buy from them at a higher price than they paid. Then it crashes and everyone panics and gets out.
Recently news has come out that Bitcoin can now be used to purchase WordPress subscriptions, a very large push for Bitcoin legitimacy. I do not expect it to last very long, but we will see.
Finally, thanks for the interesting story Oleh! I’ve never heard of Sergey Mavrody before it has led to some interesting articles on post soviet Russia. Thanks.
So according to you if someone setup a website selling $10 stocks for $50 each (and there were idiots buying them)…then the entire global stock system would be a “sham”….?.
David, that doesn’t make sense. Nobody would pay $50 for a $10 share.
I like your article, but it seems like you have a negative opinion about a beautiful concept. Yes, it needs a lot of work, but think about any new technology. First there’s prawn, then comes the hustlers, scammers, criminal enterprises. PR needs to be done showing all the good that can come from this system. I’m trying to do just that. Go to that google+ community if you would like to actually get envolved in helping find solutions, not only to the current community problems, but strategize and unite for when the system starts getting threatened by institutions.
Haytchteeteepee ess ://plus.Googledotcom/communities/117392375507105599494.