Six Things That Could Cause Bitcoin Prices To Crash en-us Wed, 31 Dec 1969 19:00:00 -0500 Sat, 27 Dec 2014 16:07:26 -0500 Henry Blodget John Love Pousse Fri, 10 May 2013 10:08:01 -0400 Good article. I have one minor quibble: yes the supply of Bitcoin can endogenously increase if a sophisticated credit system develops using it. There is already development in that area evidenced by a brokerage that allows users to buy and short Bitcoins on Margin. Because this is an emerging currency at best without the strong regulatory framework that you would get with a currency issued by a country, I doubt that this will ever emerge beyond the fringes as a currency; maybe as a facilitator of payments. RIZLE Fri, 12 Apr 2013 17:37:35 -0400 So here is where everyone's evaluation of BitCoins are wrong. BitCoins aren't a currency. They aren't a commodity. They aren't a new magical form of money. People who buy them aren't spending them on anything and they can't really be valued because the value is too one will spend when prices go up and no one will sell you anything because the prices can collapse at any moment, rendering their sale price worthless. No. BitCoins are a free and easy mechanism to do online gambling with real money. Thats it. You place a bet that other people will go nuts over BitCoins because of all the dumb media stories and then its a game about getting off at the right point. Its just a way to gamble...the coins can't be valued, but what can be valued is that fact that it is a fun game to play and potentially win free money. People play virtual slot machines all day long for fake coins....why is it a surprise that people are willing to play virtual slot machines and horse races by betting on a non-existant currenct. Its gambling, pure and simple. penguino Wed, 10 Apr 2013 15:47:31 -0400 Excellent timing!!! Great article. I am under the impression that today's panic at most of the bitcoin exchanges was a result of some rich dudes manipulating prices for whatever reason. This was bound to happen. The harder they come, the harder they fall. Deadite Wed, 10 Apr 2013 15:18:16 -0400 "Someday, Bitcoin prices may come crashing down" Apparently today was that day. Tobi Wed, 10 Apr 2013 15:13:40 -0400 Looks like you were a bit more spot on than you expected, the crash is happening live Tyler Wed, 10 Apr 2013 14:36:02 -0400 One word. Litecoin. A better crypto does exist and is about to blow up when Mt.Gox starts trading it in the very near future. Bitcoin fanatics dismiss it because they have stockholm syndrome. Just because bitcoin was first does not mean it was a perfect creation, it was flawed and litecoin has repaired many complexities that the bitcoin creator didn't forsee. dharmabruce Wed, 10 Apr 2013 14:25:33 -0400 Bullet 6: o Post an article about what could cause bitcoin prices to crash. Michael Caughey Wed, 10 Apr 2013 14:00:08 -0400 If you are interested in learning about Bitcoins, check out the book Bitcoin Step by Step on Amazon ($3.99). Download it now in Kindle format. It's a step by Step guide for beginners to learn how to get into Bitcoin in a safe and secure way. Alan Wed, 10 Apr 2013 13:15:20 -0400 This all made fair sense up until the last part, about a competing digital currency. Firstly, there already are competing digital currencies (and conventional currencies too!) The mere fact that another system exists doesn't mean everyone will dump their familiar bitcoins. Why should they? What's the upside? Bitcoin has proven itself for nearly 4 years now, with the world's best hackers trying to break it. It's no easier to hack bitcoin than it is to hack your current bank account and credit card - but you still use those, don't you? Joe Emenaker Wed, 10 Apr 2013 12:45:42 -0400 Whoops. Math error: Not $5M per BTC. Rather, $50k per BTC. Jean-Claude Morin Wed, 10 Apr 2013 12:41:28 -0400 The last 2 arguments are somehow weak. The money supply rule (21M) is not something the creator can change. It's democracy, the majority of the miner control the main blockchain. If most of then agree on new rule then it's the case. If one guy (even the creator) decide something else, that will be rejected by the main blockchain. I suggest you read the Satoshi white paper. Alternative? Yes, I love that, competition is great. Can Bitcoin be copied in the future? Don't wait, it has already been. Google "Namecoin, Litecoin, ixcoin, devcoin, ppcoin, freicoin, 10coin, terracoin, liquidcoin". It's very easy to copy open source code but the acceptance of a currency will determine it's value. Bitcoin have exchangers all over the worlds and that make it superior to it's copy. I'm not sure you can say "nothing special about it" when talking about Bitcoin. It's the first decentralized currency to ever exist... just that alone is truly special. Joe Emenaker Wed, 10 Apr 2013 12:41:07 -0400 Disclaimer: I own a whole bitcoin (woohoo!) and I'm planning on buying another couple in the next day or two. Some of my reasons why run counter to your reasons for why it could crash: 1) "A Better (or another) Bitcoin": I don't see this happening. The only reason Bitcoin is taking hold at all is because it offers some things no other currency does not... those being the ability to move it across national borders without notice of national authorities, fixed bitcoin supply, and anonymity. As such, I think it might end up being a place where the mega-rich choose to hide some of their wealth. Another anonymous digital currency could come along, but it won't have the traction which Bitcoin already has over it. This problem of being able to hide your money from the gov't only needs to be solved once. 2) "An increase in the supply of bitcoins" - From what I can gather, in order to do this, you would need to get over 50% of the bitcoin wallets out there to "vote" for an increase. This means either convincing half of all of the bitcoin holders to devalue their own wealth by supporting an increase in the supply (good luck with that), or somehow seizing control of half of the computers participating in the bitcoin network (good luck with that, too). 3) "A gov't crackdown on Bitcoin": This is a possibility. It couldn't keep people from holding or moving bitcoins, as they're anonymous, but they *could* crack down on retailers from openly accepting Bitcoin as payment, which would curtail Bitcoin's "money-ness", as you'd be less likely of being able to use it to get something you want to buy. 4) "A drop in the price of Bitcoin": Sure, this will cause the speculators running for the exits, but I think that the wild swings will start to even out as the speculators get out and the people left holding bitcoins will be people who want to use it as money. Sure, I could lose a few hundred bucks I've put into it, but think about this, for a moment. Look at what just happened in Cyprus (which, some say, kicked off Bitcoin's current run). The mega-rich were left needing some way to 1) hide their money from the Cypric authorities and, 2) get it out of Cyprus altogether, and Bitcoin struck some of them as just the ticket. Meanwhile the events in Cyprus have kicked off worry that this is just the start of a wave of wealth confiscation across the developed world. Now, the mega-rich are pathologically attached to their money; they don't like *anybody* touching it. So, just imagine if the richest 1% of the world are *just* maniacally obsessed with hiding their wealth that they're willing to put just 1% of it into Bitcoin. How does that math work out? Globally, the richest 1% in the world probably hold somewhere around $100 trillion worth of assets. And there are only going to be 21 million bitcoins. So, imagine 1% of $100T distributed across 21M BTC. That comes to almost $5 million per bitcoin. So... yeah, if BTC takes hold as a place for the rich to hide their loot, then there's some huge potential upside. And it's just starting to get noticed by the financial types. Up until now, it has been a curiosity among the geeks, but this recent run has it being mentioned in all of the legit financial journals. So, now, the folks with real dough are just finding out about it. I think the next flood of interest will be when 1BTC passes the price of 1 share of Apple; expect to see some columns about *that* when that happens. jp32 Wed, 10 Apr 2013 12:27:27 -0400 While it is true that Bitcoin creates no new value sense of manufacturing or mining a tangible good or even an intangible such as intellectual property, it DOES create value. The value created is 1) an efficient means of digital value exchange 2) a means of value store and exchange outside of govt regulation 3) a means of value store and exchange free from central bank interference 4) an anonymous means of value exchange. It has exactly the same value as any other form of money. It has the above additional forms of value beyond ordinary money. It currently lacks one primary feature of ordinary money, which is almost universal acceptance, but that is changing fast. Bitcoin also lacks some convenience of having a physical form (paper and coins), but that is increasingly becoming an inconvenience (and the anonymity of Bitcoin is replacing the anonymity of cash). So, Bitcoin definitely creates real value. TheCheese Wed, 10 Apr 2013 12:12:10 -0400 Kinda like internet stocks? "The path was blazed in December 1998 by Henry Blodget, then a little-known analyst at CIBC Oppenheimer, who stunned many of his colleagues by predicting that shares of online retailer (AMZN) -- then trading at $242.75 per share -- would rise to $400 within a year." <a href="" target="_blank" rel="nofollow" ></a> You should certainly be able to identify a bubble when you create ... I mean ... see one. Doug in Virginia Wed, 10 Apr 2013 11:55:32 -0400 I was just saying how they work. I don't really have an opinion as to it's worth / success / etc., except to note that one-sided claims that it must fail or must succeed are speculative so far. Jim S Wed, 10 Apr 2013 11:36:49 -0400 It's the better bitcoin that will eventually force the price down. There is an obvious incentive now for someone to pick up the (open source) code and create a copy, let's call it a bytecoin and save a few for themselves when they set it up. As always, competition will drive prices down. J Dominguez Wed, 10 Apr 2013 11:36:48 -0400 Well, I agree with the risks of Bitcoin being a bubble, specially the last one. However it is more amazing than this bubble tha the writer is Henry Blodget (Editor and CEO of Business Insider) was an analyst of internet stocks and had a buy recommendation on everything in ath the peak in 2000. Having him warining us of bubbles is surreal. And the chart of the bubble example happens to be Yahoo!!!! I assume this post will be censored by the editors, but had to post! Iranian Wed, 10 Apr 2013 11:32:12 -0400 I am in Iran. Pardon my poor english. We are buying Bitcoins to avoid terrible sanctions your government has brought upon the Iranian people. We Say "screw you Obama!". Now we can buy things around the world again like food and other necessities. We believe Bitcoin is the future circumvent government oppression of people. Bitcoin Savvy Wed, 10 Apr 2013 11:29:05 -0400 Hi Henry, Good to see you picking up on Bitcoin. However, you should really get to know about the facts before writing, as you're spreading inaccuracies about what Bitcoin is. There are too many to list in this small comment space, but just wanted to let your readers know that they should seek out accurate information to form their opinion about Bitcoin. Mike Steele Wed, 10 Apr 2013 11:27:03 -0400 'Because Bitcoins have no inherent value...' That's where I stopped reading. They do have an inherent value. They are the first asset to be scarce, anonymous, and secure. People saying bitcoins have no inherent value because they have no physical presence are like the people who thought you made money with hardware not software... Gates thought otherwise and look what happened to him. Their inherent value is derived from the software itself. The only flaw in this argument is, that your rightly pointed out, other equally secure, anonymous and scarce cryptocurrencies can and have been created. I have no idea how that fact will play out in the next few years. Aqua Buddha Wed, 10 Apr 2013 11:26:52 -0400 Past you are wrong <a href="" target="_blank" rel="nofollow" ></a> <a href="" target="_blank" rel="nofollow" ></a> That is only two examples, and of course there is the Dark Internet where there are thousands already!@ Aqua Buddha Wed, 10 Apr 2013 11:23:56 -0400 KSC is high on KFC! Patrick M Wed, 10 Apr 2013 11:17:58 -0400 I can't understand some of this. When you say bitcoins have no intrinsic value, what are you contrasting them with? The paper notes and digital equivalent held in banks certainly have no intrinsic value, and their value based on faith is being continually eroded. And who are the "monetary philosophers" that consider the "finite supply" of bitcoins to be an issue. Do they have a problem understanding the concept of infinite divisibility? I doubt there is anything you can spend a single satoshi on. Yet. DH Wed, 10 Apr 2013 11:17:42 -0400 So my$1 can overnight grow 600% because it's accounted for on a p2p network and it's secret what I spend it on? And people fall for this crap? Tell me, since the bitcoin fed is just a p2p network, what happens when one gets turned off? Recession? Talk about Schemes Wed, 10 Apr 2013 11:17:02 -0400 The Federal Reserve is a Pyramid scheme! Should Henry refuse to cover any articles on the Federal Reserve? Simple explaination Wed, 10 Apr 2013 11:13:09 -0400 Bitcoins are a method of exchange. You buy things and sell things with them. They have many advantages over the other methods of exchange available. 1. Untraceable/ anonymous (similar to face to face private cash exchanges) 2. Untouchable by monetary manipulation (central bankers) 3. Borderless (you can exchange with Russia + China) 4. No taxes or regulatory overhead 5. Freedom to spend your own damn money! (What do Visa, Mastercard, PayPal, and pretty much all the big banks have in common? They all block you from giving donations to WikiLeaks! Now, whether you approve of WikiLeaks or not is a personal decision ( you can probably guess that I love them Smiley ), but that’s the point — it’s YOUR choice. By restricting what you can spend your money on, the current financial system is overriding your decisions and controlling you. Use Bitcoin, and spend your money freely.) 7. Immune to Litigation (Anyone who has been sued, or has been threatened legally, knows that your money and property are NOT SAFE in a world owned by lawyers.) KSC Wed, 10 Apr 2013 11:08:55 -0400 Henry - you should be ashamed of yourself. Acting as a Bitcoin booster is immoral. Bitcoin is a pyramid scheme. There is no real value created. The early participants can take money/value out of the process only to the degree that later participants keep putting fresh money/value into the process. Unless the population and wealth of the plenty suddenly start growing exponentially then there will eventually be a point where a lot of people lose money/value. And if you look at the mathematics of the situation it is a zero-sum game (or even slightly negative sum game) so for each dollar made in profit there is at least a dollar made in lose. You wrote "As long as the chance of each outcome is roughly the same, downside of 100% and upside of 600% is a great bet." Like any pyramid scheme the return on investment for the early participants (who get in and get out) looks great. However, you assumption "chance of each outcome is roughly the same" can not continue to be true forever. And it is the later participants (the ones who got in based on your cheer-leading) who are the ones that will get screwed. You are smart enough to understand all this. Why are promoting bitcoin? Still Laughing Wed, 10 Apr 2013 11:04:11 -0400 I have "bought" most of my BTC at $35 and i don't consider a pullback back to 35$ possible. Like any currency, its strength is in the people who use it. People who bu BTC have a solid belief that the current banking system is in long term decline and will need constant taxpayer funding and welfare just to stay afloat. I can buy most things with BTC and I use them more and more everyday. I'm sure there are plenty of people out there just like me who also mine them. Some people just naturally resist change because they are either afraid or do not have the ability to understand. Change is good and we can only fix things by being proactive. People who are afraid to leave the current banking system or at least diversify will be left behind. poor and molested by central bankers. Doug in Virginia Wed, 10 Apr 2013 11:03:03 -0400 There is a repository of "bitcoins" maintained by cooperating computers across the internet. Each bitcoin is in essence a serial number. The Bitcoin software system keeps track of where all of the 11 million ish BItcoins are, so that when you get one, you can tell if it it's legitmate. Kinda like a certificate of authenticity for a collectable. IN exchange for keeping this transaction history up to date, cooperating computers periodically can claim ("mine") groups of bitcoins. The supply will grow very gradually until it roughly doubles in 27ish years. Bitcoins have value a) because people think they do and will pay money for them and b) because they can be used to purchase some things like illegal drugs that are problematic to pay for online in other ways. DH Wed, 10 Apr 2013 10:55:05 -0400 Is bit coin real or is it just a made up spoof from funny or die? DH Wed, 10 Apr 2013 10:52:18 -0400 I still have no idea what a bit coin is. I've read some articles, including this one, and wonder wtf a bit coin is and why you would want one.