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Bitcoin's Recent Slide -- Harbinger of Cryptocurrency Problems in General?

posted by martyb on Tuesday February 06 2018, @03:01AM   
from the Trouble-In-Bitcoin-City dept.

All Your Lawn Are Belong To Us writes:

An article on Ars Technica notes the continuing slide downward of Bitcoin prices (down below $9,000 per coin from a December peak of $19,500). It also notes some recent news about Facebook ads and crypto, SEC Action against a different cryptocurrency project, and rumors about a still different coin's possibility of insolvency.

Meanwhile, rumors are swirling about Tether, a cryptocurrency whose value is pegged to the United States dollar. Tethers are supposed to be redeemable for dollars at any time, but in recent months Tether has struggled to gain access to the conventional banking system and has failed to produce a financial audit demonstrating its solvency.

I'm not sure if the article is connecting unconnected stories of problems or if the theme of trouble in crypto-land generally is valid. But this quote got me to thinking how much the state of cryptocurrency may be like the Free Banking Era in the United States in the 1800s and the Wildcat Banking that signaled its demise. We discuss cryptocurrency a lot on Soylent, but are the troubles of various operators all linked or is it unrelated coincidence?

[Ed. Note: The linked story at Ars Technica was updated to report that the price of one BitCoin dropped below $7000. As of this writing, coinbase reports the price dropped to about $6400 (Javascript required). Note this price is still $5500 ahead of where it was this time last year when it had just inched above $1000.]

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Original Submission

• Re:On intrinsic value of things Re:On intrinsic value of things (Score: 2, Informative) by Anonymous Coward on Tuesday February 06 2018, @04:02AM (1 child)

  by Anonymous Coward on Tuesday February 06 2018, @04:02AM (#633622)

  Did anyone else read Cringely's prediction?
      https://www.cringely.com/2018/01/24/prediction-4-bitcoin-crashes-booms-crashes-booms-2018-traders-figure-not-currency/ [cringely.com]

  The problem with Cryptocurrencies, and the reason why their prices (and implied underlying value) are so volatile, is because the basis of that value isn’t the same as the basis for a real currency. It’s not backed by gold. It’s not backed by “the full faith and credit of the United States of America.” It’s not backed by, well, anything. In that sense of innate value cryptocurrencies are worthless.

  But this is not to say that Bitcoin has no value. It’s just that the value is misunderstood. And here’s probably the most important point I am trying to make here: as long as the value of Bitcoin is misunderstood there will be hucksters taking advantage of suckers, stealing their crypto lunch money.

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• Re:On intrinsic value of things (Score: 2) by crafoo on Tuesday February 06 2018, @05:33PM

  by crafoo (6639) on Tuesday February 06 2018, @05:33PM (#633968)

  Nope. It's not misunderstood. Saying a currency is "backed by XXX" is just a factor into each individual's calculation of how probable it is they can exchange it for real goods and services in the future. It may stabilize the value over time, which makes them somewhat more sure that they can get a dozen eggs next week with it. The value of currency is what people believe they can exchange it for at some later date. That's it.

  Cryptocurriencies are volatile because of their relatively low total capitalization and the ease at which people are speculating and manipulating the value. People with real money and power are extracting capital from idiots. However, as long as they can be exchanged for goods and services, they will always retain some amount of value.

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