A brief history of Mt. Gox, the $3B Bitcoin tragedy that ...
Mt. Gox admits DDoS attacks played role in Bitcoin crash ...
Longterm Non-Linear Regression Analysis of Bitcoin Exchange Rate based on price data for over 7 years
I would like to share this plot (old plot) that I made. I calculated a non-linear regression based on daily weighted arithmetic mean of BTC exchange rates, the plot shows the development over 20 year. As usual, this is not a "set in stone" result, it merely reflects the dynamics of the market over the last seven years. Future singular events, such as the mtgox crash in the past, could significantly alter the prediction. The basic result from this graph is that we are currently in a bubble (also known as speculative mania), a possible crash could wipeout as much as 70% of the current value. The questions are when exactly will the bubble burst and if a crash can be avoided altogether. (Of course, nobody can really answer these questions.) But in order to avoid such a devastating crash the dynamics of the market has to change fundamentally in the near future. Personally, I am expecting either a correction downwards (which could be quite massive) or a sideways movement until the exchange rate meets with the regression curve. I do not expect that we can keep growing at the current rate for much longer. The market is driven by psychology, many new people are coming in with expectations of great and fast profits, which is the typical fuel of a bubble. Such support of the price is fragile and unpredictable. On the other hand, Bitcoin is taken increasingly seriously by the classical financial industry, which could lead to unexpected longterm support for such high exchange rates which we are seeing right now. Further, development of new technologies, such as the Lightning Network, could lead to a fundamental change of how Bitcoin is utilized, from the nowadays common use as a storage value as opposite to a true currency. (Of course, there is also always the looming risk of a flaw in the software, which could lead to a total lost of value. But we can only hope that the revision and testing process of the next bitcoin iteration will be held to high standard.) We can expect that such a fundamental change will have an effect of the market dynamics. Edit: On the positive side, I should have pointed out that according to the non-linear model I used, the growth rate of the bitcoin price is polynomial, proportional to ~ t5.7 where t is the number of days since Bitcoins creation. This result alone is pretty incredible, it means that for the past seven years we had a growth rate to the power of 5.7. It is not exponential growth, but still quite amazing. I am not aware of any other assets with such growth rates for such a long period of time. Edit: uploaded updated hi-res version Edit: formating
A word of caution. All major exchanges are not even fiat gateways. The actual fiat in the system is likely grossly overestimated. Crypto is decoupled from USD. Implications.
First of all i should disclose i'm fully out of crypto since last Sunday, i'm just waiting for my EUR wire from Bitstamp as that has been my gateway since 2014. I would like to thank bitcoinmarkets for the good times, i've been around for a long time but not really participating that much, and even when I did i used throwaways. I decided to make this topic as a warning and to explain why I got out and why I think you should be very careful. So we have a situation in which: 1) 80% or more of trading is in USDT (tether) 2) Coinmarket cap is an accomplice to Bitfinex which implies USDT-USD parity. To which degree this is intentional, irresponsibility or just incompetence I would not know. Basically conimarketplace lumps all USDT trades and prices with actual USD trades and prices. If you go there https://coinmarketcap.com/ and try to select PAIR, you get THIS. No USDT, even though most exchanges are USDT. Even if most of liquidity is USDT. Again, this is a major factor in implying parity along with what Bitfinex/Tether try to do. As if this wasn't enough, they also willingly or stupidly inflate USDT price itself. I have to remind you Coinmarketcap is THE point of reference for all cryptosphere. It's oscilating Alexa rank is 100-400. Betfair (real life gambling company) for example uses coinmarket price average for their own system. etc. 3) If/when tethebitfinex crashes, not only does bitfinex crash, it will crash all crypto pairings using USDT on all exchanges using USDT. 4) There are very few fiat gateways. Until recently I assumed the major(top) exchanges have some kind of fiat pairing. I mean.. any respectable exchange would have some way of actually getting money in and out, right? I didn't even think to check. Well, they don't. Literally all the major exchanges are USDT (and/or another stablecoin or proprietary coin) and nothing else. No USD, no EUR, no fiat whatsoever. https://coinmarketcap.com/rankings/exchanges/ . Only the 11th one has actual USD pairing. Didn't check lower but most exchanges don't have fiat. I did a full check on Binance myself as it's the biggest exchange and I had an account there for lulz. There is no fiat. What does this mean? It means that an allegedly 200 BILLION market cap of all crypto has a fiat gateway of only a couple of exchanges. Most exchanges not using any fiat are not only immune to the risk, they offload risk on the much smaller exchanges that are fiat gateways. And on clients, of course. The cash side of the actual exchanges would need to have to siphon even a fraction of this are unimaginable. If any of these exchanges use crypto to evaluate their own fiat balance (it is illegal but crypto is hardly regulated or audited), they're fucked. 5) If the first four points looked bad, this one is by far the worst. The system is running on a presumed liquidity provided by Tether and on presumed USD capital. Even if tether was legit it's just 2b USD rolling 200b USD. And that 200b USD is just presumed quantity of USD that is in. We don't know how much USD is in the system, there could be and there probably is way less, as over the past 8 years or so crypto ran mostly on funny exchanges that could "provide" whatever USD value they wanted. More so, even if they went bust, people would usually get to withdraw crypto and store it on some other exchange. Even when an exchange was slowly withering, people just pulled out crypto and the exchange actual liquidity was hardly tested out. Or btc-e crashing or MtGox crashing. Their cash side crashed but "crypto" side did not crash. It was bailed out so to speak. So we have crypto running around that should've been worth 1/10 or 1/100 of it's price but it's instead running on par value with crypto on legit exchanges. This grossly inflates price. Even if tether (or other stablecoin) is legit, it can be drained in a couple of hours. What happens to the pairings of crypto/USDT? People just trade one bitcoin at the presumable price of 6k for 6k USDT that are 100% backed but have no value because there's no USD in the treasury? Who is stupid enough to deposit USD there to get stuck waiting for another fool to bail him out by getting himself stuck? edit: [Even if tether is 1%, it holds much more assumed/created value, which is the actual issue. Look at it this way. It only adds 1 cent to a real dollar market buy order for example. Each buy order made in a system that implies USDT:USD parity is now worth 1% more than a true USD purchase. Now repeat that buy order millions of times. It's not 1.01+1.01 times 1 million. It's more like 1.01$1.000.000 Each added value comes from USDT injection and USDT has to be liquid on the way down as well. It's added value to the market value is NOT it's market cap. That's a shitfest all "stablecoins" inject into the market, no matter how backed or audited they are.] As I was saying, all the exchanges that are not holding any fiat are immune to any crash or actual liability. If/when cryptos fail, they'll give you back any number of cryptos/stablecoins you had, even if they're worthless. It's just entries in a database. If/when USDT fails, all it's corresponding crypto prices will go to infinity. If you're holding any USDT, you can't get out of the exchange because 1 btc will cost infinity. If you're in any margin position, no matter where your stops are you'll get margin called instead, as stops are just suggestions in high/extreme volatility. You can't get out through fiat cause there's no fiat. Your only hope is you were actually holding crypto and they don't block withdrawals. Best case scenario you move your crypto to a fiat gateway exchange and hope to cash out there as fast as possible because it will have had become evident that cryptos were overvalued because of USDT (and even hypothetical USD in the system). Will most likely be too late as people that were already in fiat gateway exchanges already sold/cashed out. There will be enormous sell pressure. And no buyers. The whole stablecoin issuance is idiotic and I just hope it crashes now and we won't see another bubble built on presumed capital, cause that will hurt way more people. All of this is a mess. Crypto is completely decoupled from real fiat now. The potential money that are in the crypto sphere is exponentially greater than available money to trade out of. Or maybe we should be grateful for stablecoins for finally crashing a system that would've crashed anyway in the long run.
Edit: This is purely speculation. I'm willing to believe that MtGox will resume withdrawals once they solve the technical issues. Step 1. Notice that there isn't enough BTC or USD to handle even the pending withdrawals Step 2. Halt BTC withdrawals, causing a massive crash on MtGox Step 3. Buy BTC on MtGox at the reduced price Step 4. Sell this cheap BTC (which they have access to, of course) on other exchanges, making a massive profit Step 5. Blame a well known bug in BTC for the delay. Continue this process for weeks until enough profit has been made. Step 6. MtGox now has: a ton of cheap bitcoin, a ton of profit made from selling the cheap bitcoin, and a ton of profit made from the trading fees during the panic. Re-open withdrawals of both USD and Bitcoin, solvency problem is solved.
TL/DR: A young man had a secret. To keep it hidden, he kept digging until the hole was a billion dollars deep. This is a speculative tale of a great bitcoin theft from MtGox in 2011 and the efforts that this man undertook to fix it. The tale explains the bitcoin bear market of 2011, the explosive rally of 2013, delayed fiat withdrawals, malled transactions, and a bot named Willy. “By the time you realize that real life has begun, you are already three moves in.”—Author unknown It was June 19, 2011. Mark, a 26 year-old young man—a boy really—was ecstatic. He had recently purchased MtGox—a small, online exchange for trading virtual tokens—and business was booming. These virtual tokens were called bitcoins and Mark loved them. Bitcoins were an obscure curiosity: a peer-to-peer electronic cash system that allowed users to store and exchange credits with any other user in the world, nearly instantly, and without the assistance of a third-party or the permission of an authority. All that was needed was a 78-digit secret number—a key if you will. In order for his customers to withdraw their bitcoins over the internet, MtGox stored some of these keys on its online server. The remaining keys were stored on USB drives and backed up on paper to prevent theft should the server be compromised. But theft was hardly a concern. In October of 2010, bitcoins were trading for $0.10 and the half a million bitcoins held by MtGox was worth only $50,000. But still Mark took precautions, diligently moving bitcoins to offline storage and leaving only what was necessary for customer withdrawals online. He truly wanted both his business and bitcoin to succeed. By April, the bitcoin price had risen to $1 and by June it had exploded to $30. Between June 1 and June 15, an additional one million bitcoins were sent to MtGox and immediately sold, crashing the price back to $10. It was a hectic time, with hundreds of customers needing help, visits from the FBI related to the Silk Road black market, and stress related to the recent market crash. Young Mark was becoming a victim of his own success: there simply wasn’t enough time to get everything done. On this very day in June 2011, the keys to the recently-deposited 1,000,000 BTC were still sitting on his server. Later this day, a group of hackers gained access to MtGox servers and executed fake trades that the world could see, driving the nominal price of bitcoin near $0. Mark was frantic. He quickly regained control of the servers and learned the dark truth: the million bitcoins that had recently flooded in earlier that month were gone. Mark admitted publically to the hack, rewound the false trades, but kept the truth of the missing coins a secret. How could this 26-year old explain to his customers that he had lost their bitcoins? And if the world found out, would this kill the thing he loved so dearly? Would he go to jail? Or worse yet, would someone kill him? Mark decided that he would do what he thought was right: he would slowly earn back the lost bitcoin with MtGox trading fee profits and eventually make his customers whole again. He still had over 500,000 BTC left—he moved 424242.42424242 BTC between bitcoin addresses and convinced the community that MtGox was solvent. As long as withdrawals didn’t exceed deposits over a long period of time, no one would ever find out the truth. Or so he thought. Meanwhile, the bitcoin thieves slowly mixed their coins with other coins, obfuscating the chain of ownership, and then re-selling these coins on MtGox using sock-puppet accounts. Mark tried to stop them, but there was no way he could know for sure which accounts were fraudulent—he even accused innocent people of bitcoin laundering. The constant selling of these stolen bitcoins drove the price down to $2 in November 2011. Mark faithfully used all of the MtGox profits to purchase coins back during this decline. But he would never use customer funds—that was a line he swore not to cross. The selling of these stolen bitcoins continued at a diminished rate over 2012, and Mark continually purchased coins using the MtGox trading fees. The bitcoin economy was growing and new exchanges were opening up across the world. His bitcoin reserves weren’t building fast enough but the price of bitcoin kept rising (along with the dollar value of the missing bitcoins). He was worried that other exchanges would suck coins out of Gox and reveal his secret. He decided he needed to take decisive action: for the first time, he used customer funds to purchase real bitcoins. These large purchases by Mark further increased demand and ignited the great rally of spring 2013 when the bitcoin price shot from $20 to $266. Mark had reduced his liability in bitcoins, but in dollar terms the coins that were still missing were worth more than ever before. On May 15, 2013 the US Department of Homeland Security seized millions of dollars from the MtGox Dwolla bank account. MtGox dollar reserves were already depleted at this point, and with the recent seizure, Mark could no longer make good on customer withdrawals in US dollars. Under the guise of “banking problems,” MtGox slowed US dollar withdrawals to a trickle in the summer of 2013. Customers became increasingly worried and began to bid up the price of bitcoin on MtGox, as this was the only way to escape with their funds. MtGox had little fiat and very little bitcoins, but it learned one thing: as the price differential between Gox and BitStamp grew, the outwards flow of bitcoin slowed dramatically. And so Willy was born. Willy was a bot, discovered by Wall Observers from bitcointalk.org and named by Opet on Bonavest's trading show, who would consistently purchased bitcoins at regular intervals between November 2013 and February 2014. Evidence that Willy belonged to Mark was revealed when both web and API trading at Gox was disabled for a brief period of time, exposing Willy as the only one left buying. Willy served two purposes: he drove the price of bitcoin on the MtGox exchange high, thereby slowing and sometimes reversing the outward flow of real BTC, and he reduced the number of GoxBTC held by clients. Of course, this meant that Willy eventually became the owner of a huge number of GoxBTC (that were of course no longer backed by real BTC). By December, the situation at MtGox was grim. In a desperate attempt to attract more funds, Mark offered reduced trading fees under the guise of celebrating their 1,000,000th customer. This partially worked, but Mark knew it was too late. If MtGox collapsed, it must appear that he didn’t know about the theft until now—for it was better to appear incompetent than criminal. It was time to cover his tracks. He purposely mixed immature coins into bitcoin withdrawals to delay the outward flow of coins, and later began malling his own transactions. He added the Gox malleability weakness not as a bug, but as a feature, so that it would seem plausible that outsiders had recently stolen the coins without his awareness. No coins were actually lost to malleability. The MtGox coin supply dwindled to 2,000 BTC and on February 7, 2014. He had no choice but to disable bitcoin withdrawals. The end was near. The problem Mark faced was that his customers had $150,000,000 credited to their accounts, yet the MtGox bank account only contained $38,000,000. He could blame the missing bitcoins on transaction malleability, but how could he explain where the fiat money went? He shifted Willy into reverse and cranked the throttle. Willy relentlessly dumped bitcoins into the open bids. The price fell further and further, eventually dropping well below the BitStamp price. But still not enough people were buying! He needed his customers to buy the GoxBTC. Willy kept dumping coins until finally the price dropped below $100. MtGox even acquired new USD bank wires from customers looking to purchase the cheap coins. By this time, the majority of Gox customers had converted their dollars into bitcoins. On February 28, 2014, Mt Gox filed for bankruptcy protection in Tokyo, reporting 6.5 billion yen in liabilities, 3.8 billion yen in assets, and 750,000 of customer bitcoins missing. Willy had failed to completely close the fiat solvency gap and Mark finally admitted to having lost the coins. Now we watch the rest of the story unfold. A story of how an oversight during a hectic period, an untimely theft, and an attempt to cover it up, lead to the greatest loss in the history of bitcoin. Cross-posted from: https://bitcointalk.org/index.php?topic=497289.0
A word of caution. All major exchanges are not even fiat gateways. The actual fiat in the system is likely grossly overestimated. Crypto is decoupled from USD. Implications.
So we have a situation in which: 1) 80% or more of trading is in USDT (tether) 2) Coinmarket cap is an accomplice to Bitfinex which implies USDT-USD parity. To which degree this is intentional, irresponsibility or just incompetence I would not know. Basically conimarketplace lumps all USDT trades and prices with actual USD trades and prices. If you go there https://coinmarketcap.com/ and try to select PAIR, you get THIS. No USDT, even though most exchanges are USDT. Even if most of liquidity is USDT. Again, this is a major factor in implying parity along with what Bitfinex/Tether try to do. As if this wasn't enough, they also willingly or stupidly inflate USDT price itself. I have to remind you Coinmarketcap is THE point of reference for all cryptosphere. It's oscilating Alexa rank is 100-400. Betfair (real life gambling company) for example uses coinmarket price average for their own system. etc. 3) If/when tethebitfinex crashes, not only does bitfinex crash, it will crash all crypto pairings using USDT on all exchanges using USDT. 4) There are very few fiat gateways. Until recently I assumed the major(top) exchanges have some kind of fiat pairing. I mean.. any respectable exchange would have some way of actually getting money in and out, right? I didn't even think to check. Well, they don't. Literally all the major exchanges are USDT (and/or another stablecoin or proprietary coin) and nothing else. No USD, no EUR, no fiat whatsoever. https://coinmarketcap.com/rankings/exchanges/ . Only the 11th one has actual USD pairing. Didn't check lower but most exchanges don't have fiat. I did a full check on Binance myself as it's the biggest exchange and I had an account there for lulz. There is no fiat. What does this mean? It means that an allegedly 200 BILLION market cap of all crypto has a fiat gateway of only a couple of exchanges. Most exchanges not using any fiat are not only immune to the risk, they offload risk on the much smaller exchanges that are fiat gateways. And on clients, of course. The cash side of the actual exchanges would need to have to siphon even a fraction of this are unimaginable. If any of these exchanges use crypto to evaluate their own fiat reserves (it is illegal but crypto is hardly regulated or audited), they're fucked. 5) If the first four points looked bad, this one is by far the worst. The system is running on a presumed liquidity provided by Tether and on presumed USD capital. Even if tether was legit it's just 2b USD rolling 200b USD. And that 200b USD is just presumed quantity of USD that is in. We don't know how much USD is in the system, there could be and there probably is way less, as over the past 8 years or so crypto ran mostly on funny exchanges that could "provide" whatever USD value they wanted. More so, even if they went bust, people would usually get to withdraw crypto and store it on some other exchange. Even when an exchange was slowly withering, people just pulled out crypto and the exchange actual liquidity was hardly tested out. Or btc-e crashing or MtGox crashing. Their cash side crashed but "crypto" side did not crash. It was bailed out so to speak. So we have crypto running around that should've been worth 1/10 or 1/100 of it's price but it's instead running on par value with crypto on legit exchanges. This grossly inflates price. Even if tether is legit, it can be drained in a couple of hours. What happens to the pairings of crypto/USDT? People just trade one bitcoin at the presumable price of 6k for 6k USDT that are 100% backed but have no value because there's no USD in the treasury? Who is stupid enough to deposit USD there to get stuck waiting for another fool to bail him out by getting himself stuck? Even if tether is 1% it holds much more assumed value, which is the actual issue. Let's say only adds 1 cent to a real dollar market buy order for example. Each buy order made in a system that implies USDT:USD parity is now worth 1% more than a true USD purchase. Now repeat that buy order millions of times. Each added value comes from USDT injection and USDT has to be liquid on the way down as well. It's added value to the market value is not it's market cap. As I was saying, all the exchanges that are not holding any fiat are immune to any crash or actual liability. If/when cryptos fail, they'll give you back any number of cryptos/stablecoins you had, even if they're worthless. It's just entries in a database. If/when USDT fails, all it's corresponding crypto prices will go to infinity. If you're holding any USDT, you can't get out of the exchange because 1 btc will cost infinity. If you're in any margin position, no matter where your stops are you'll get margin called instead, as stops are just suggestions in high/extreme volatility. You can't get out through fiat cause there's no fiat. Your only hope is you were actually holding crypto and they don't block withdrawals. Best case scenario you move your crypto to a fiat gateway exchange and hope to cash out there as fast as possible because it will have had become evident that cryptos were overvalued because of USDT (and even hypothetical USD in the system). Will most likely be too late as people that were already in fiat gateway exchanges already sold/cashed out. There will be enormous sell pressure. And no buyers. The whole stablecoin issuance is idiotic and I just hope it crashes now and we won't see another bubble built on presumed capital, cause that will hurt way more people. All of this is a mess. Crypto is completely decoupled from real fiat now. The potential money that are in the crypto sphere is exponentially greater than available money to trade out of. Or maybe we should be grateful for stablecoins for finally crashing a system that would've crashed anyway in the long run.
EOS Update September 6, 2018. Market Crash, And What Might Follow
I think it’s fair to call this a crash. Around 20% down for most alt coins and Bitcoin down 12-13%. Why is this happening? No one knows for sure of course. Some are pointing to Goldman Sachs ditching plans to open crypto trading desk. But it seems like they are forgetting that GS is instead opening for crypto custody. In other bearish news we have some MtGox Bitcoin being moved to an exchange and Silk Road Bitcoin being dumped on the market. This could be the reasons for the dump, or it could be what many believes, orchestrated clustering of bad news to “Justify” market manipulation. Who wants the market to go down? Either institutions or very rich individuals that are looking for a better entry, and or let’s not forget what and who we are up against here – the banks and politicians. I believe that many underestimate their power. We are not playing around here. Crypto was starting to free people and the peasants (us) started realising how the free market incentivised us to improve, socialise, share ideas, be enthusiastic. No no no, can’t have any of that. That is not the emotions and traits banks and governments wants us to carry around. They want us supressed and depressed. Oh…oops, sorry, that’s the text I prepared for the meeting later..down at the docks.
bullish on USD. it is clear USD is increasingly popular with past hodlers of the deprecated bit-Coin. USD has gone up hugely in just the past day against the b.t.C!! in the future it is posible with enough imagination that the US economy could run on USD ! in conclusion you should get into currency (186 points, 26 comments)
This situation is not the end of the world. It is not some massive shift in the world of Bitcoin. It is not MtGox's fault. It is not the high frequency traders fault. It is not even the speculators fault. Merchant acceptance will not save us from these things. We are dealing with a massive new technology that has the potential to change everything. It will change how money is transferred between countries. It could become the international standard among currency evaluation. It will change how the drug/black market operates. It will change how Governments regulate borders. This is not a speculative stock. This is not a currency useful for day-to-day trading. You cannot be a "bitcoin millionaire" without knowing that if the network got cracked, you'd be worth $0 in minutes. We have a long, long way to go yet. In order for the above things to happen(and they WILL happen, even if bitcoin gets cracked or made illegal- something else will replace Bitcoin), the market size of Bitcoin needs to increase.
$50k - Early adopters will push it up($0.01->$0.20).
$1 million - People will start using it for small transactions(silk road).
$50 million - Small time illegal activity will flow through it, and people will start to use it to transfer money across borders(See; Argentina post recently).
$1 billion - Mid-level illegal transactions and mid-sized legal transactions will flow through it. Angel and VC Investors(200k - 5 million) will move in in increasing size will both invest and create startups(happening now; this is the step we are on.We will never go back to step 3 unless the Bitcoin network itself is cracked).
$25 billion - Higher level illegal transactions(mob bosses) and larger investors(multi-million sized) start to move in. Governments start to get involved, try to regulate what they can, and create rules for the system. High net worth individuals use it for international currency transfers.
$400 billion - After that, large businesses & investors move in. Becomes the de-facto standard for illegal activity. Government regulation cracks down and becomes more rigid. Some(A few) Bitcoin businesses are shut down by the Government without warning, prompting fear and anger. Small companies regularly use it for international currency transfers.
$1 trillion - After that, International currency movements start to flow through it. Very large investors move in, it is talked about as if it were standardized and common. Businesses learn to follow Government rules and procedures become standardized. Large businesses use it to transfer currencies internationally.
$5-20 trillion - Becomes the de-facto standard of international trade and currency evaluation, replacing the dollar as the global standard. Prices stabilize and shift only a fraction of a percent a day. Can now be used as a real currency for the first time since inception.
Do I know for sure this will happen? Of course not. But the first 4 steps were pretty clear in hindsight. And it makes sense- Why would ANYONE use the dollar for international money transfer post-Bitcoin? It depreciates, it is expensive to move, it is heavily regulated and tracked, it is subject to seizure. It is subject to the whims and mistakes of one government, who are all subject to the whims of their short-sighted voters. So now how the fuck do you go from a $500 million currency to a $5 trillion currency? It isn't going to be a linear graph- that doesn't make any sense. It isn't going to be a smooth rise- Why would it? If everyone can see a nice, smooth, pretty graph going up, everyone is going to buy into that nice, smooth, pretty graph. It isn't going to be unidirectional- If the price always went up, everyone would buy into the up, and it would overshoot any and every step. It isn't going to happen quickly- Many of these steps take time to build confidence and make mistakes to learn from. No, it is going to be a very painful up and down process. Because the technology has so much potential, it is going to experience explosive growth. Because it experiences explosive growth, it is going to have dramatic, painful, scary collapses. Then there will be fear. Then it will stabilize, and then it will start growing again. A few months later, it will explode again as it approaches the next big transition. It takes time for Bitcoin companies to get their systems in order. It takes time for them to earn our trust and for us to weed out the scams and unreliable ones. It takes time for VC and Angel investors to evaluate and plan Bitcoin ventures. It takes time for Bitcoin to adapt to its own growth. For those who think merchant adoption and currency status are the step we should be on, you are gravely mistaken. The only use that merchant adoption has right now is 1. Getting more people into it/increasing transactions, and 2. making a legal case for why Bitcoin shouldn't be illegal(which would slow us down by 10-25 years). This is not the last big rise. This is not the last big crash. We aren't even at the bottom of this one. Until the network either gets cracked or replaced, this is going to keep moving forward. There is no going back; We've improved the Gold coin, the Dollar, and the wire transfer all at once. Hang on to your seat, and stop panicking over just another crash. tl;dr: This is not the last big rise. This is not the last big crash. Stop panicking and focus on the long view.
So, having read around it seem how the MtGox payout calculation will work is relatively straight-forward. Simply, each person has a cash value that Mt Gox owes them. This is either your cash balance or your amount of Bitcoin multiplied by $454. This total gives you the $416m listed in liabilities. Now, the interesting part and where the recent Bitcoin rise comes into play. The amount that can be raised from the assets (in particular the 202,000 Bitcoins) will then be divided according to the overall debt and this is the percentage amount you will get back. So, my example: I have 20 Bitcoins in Gox Mt Gox liability to me $9080 (20 x 454) Now, should the price be around where it is today, $750, those Bitcoin holdings are worth $151m. This gives a percentage of around 36% of total debt. As such, my expected return as of today would be $3300 (9080 x 0.36). Should the price continue to rise, my return in cash terms will continue to push higher. Should it crash... then the opposite. Of course, the amount of Bitcoin I get back (should that route be offered) will remain fixed - just the value of each one will rise (or fall). (Note: I haven't included the $9m in cash assets listed as this is likely to be eaten up with further legal fees in my opinion - the bill after all is already at $5.5m and there still seems some way to go.)
Technical analysis of post-950 crash, 440 bottom, and where we're headed next(?)
Destination Just my naive, simple analysis of what's happened so far. Warning I am insanely new to this, like, virgin-grade new. Like, two weeks ago I knew zero about trading, but over the past two weeks I've been talking to trading friends and digesting a ton of information. As a result of this, my analysis is going to be A) incredibly basic, and B) prone to incredible error, and C) possibly incredibly ignorant. I'd love to read any generated discussion and any feedback/criticisms you have of any of the analysis so far. I came into possession of ~.92 BTC around the 9th of December. I'd briefly followed the BTC charts in the past, but never with extreme interests as I was never holding. Since I came into possession of the .92 BTC I'd decided I'd have fun trying to gamble with it in the mtgox exchange, and here's my findings/analysis/progress/etc...over the past couple of weeks.
I came into the market off the tail of the huge crash on the 5th-7th. I had the ability to trade my BTC from the 9th onward, so that's what I was primarily concerned with.
From the 9th-10th, there was a lot of sideways movement without very much variance, which had me incredibly nervous cautious (I had nervous here, but I don't want to give off the impression that I was scared of losing the money and prone to panic selling, I was just anticipating a large down-trend in the market, following the negative news from China and the double peaks of resistance we experienced at the 1250 mark). It met resistance twice at 980, which pointed towards a possible second fall. Given the recent news with China and the failure to pass the resistance, I think selling mid-way through the 10th would have been the most responsible/logical decision.
On the 11th it appeared like it was going to rebound, but without support from China it seemed highly unsustainable. I was feeling nervous cautious about another sharp crash here and the trend reversed itself very quickly. After more sideways action, I dumped on the 12th, expecting a sharp decline in the coming days. I think the dump here was a reasonable choice, given the information available to the market and where we'd just come from. I saw no rationale for expecting us to climb back to previous levels and the sideways movement seemed like it could only reasonably move in one direction. Do you think that was a fair assessment?
After selling at 915, a clear downward trend starts to form that's very obvious by the 15th. I think any reasonable person who was interested in dumping their holdings to avoid anything lower should have exited the market on the 15th, when the previously established support at 836 gets tested again and eventually fails the day after. Even though we bounced from the established support (on the night of the 12th) on the 15th, the peaks were getting progressively lower. In combination with the news, I think it's fairly obvious that it's a downtrend from there. This could be hindsight speaking, of course, which is something you always have to be aware of.
Once we lose that strong support at 835, the next support seems to come at around 680, but that wasn't a very strong support. Neither was 650. The strong support we bounced back from was at 575, so I put a buy order in at 585.5 and waited, with a stop loss at 556 if the support failed (so I could cut losses and prepare for the next support).
Once my stop loss kicked in (I say stop loss but I'm doing the orders manually since I'm too dumb to have a bot set up) I dumped at 556 and waited for the next major support to be tested. This support was 450-475, all the way back on November 20th. I wasn't sure if the market would even still have support at this level, but there's not much other information to go off of. I had a buy order set at 478 and was ready to dump at 440. If we fail this support, we're falling below 400, and previous supports didn't look very strong.
My buy order was executed at 478, and I waited for the support to fail below 440. Thankfully it didn't, and it seems as though the market bounced up at around 452, which is where our expected support should have kicked in. I think that the order here at 478 was good, based on the previously available information, but I'm exposed to hindsight bias here.
So where are we now? I think from that point on I was trying to figure out where the next major resistance would be, but we moved so much volume and we dropped so much that it's hard to tell. As of right at this very moment, the market -appears- to be trending upward, depending on the formation of this next peak, and my current sell order is at 780. I know it's a bit optimistic, and I might change my sell order based on how these next few peaks look, but surviving the bounce back at 475 was important (in my uneducated!! opinion) and I feel like it's possible we could trend back up there, as our drop from 720->480 was incredibly sharp, with a few large dumps on the way there. Do you think there's any merit to this form of analysis in this market? Do you think any of the trades I made were ill-advised, and do you think my current hope/prediction(I use this term LIGHTLY) will hold true? If yes, why, if not, why, etc...etc... I know some people don't like to share specific numbers, but this money is just fun money for me so I don't mind - I began with .92BTC and am currently holding a little over 1.6BTC on mtgox. My starting USD in this exchange was around $820, and if I'm able to dump at 771 (current sell order) I will have $1233.71. My current BTC worth is ~$992 For beginners/newbies looking for easy "buy now/sell now" guides: I am 2 for 2 on trades so far so it might be tempting to simply dump 100% of your holdings into the analysis I'm using, but my sample size for successful trading is far, far too low to be something you should base you own investments on. It's very possible that I am trading incredibly EV- and simply got lucky in my first few trades. Would love any criticism/suggestion/feedback on this analysis so far! Reading materials etc...are all welcome.
I've been following and trading on the entire Mtgox episode and doing my best to piece together the clues - Here is my theory from what I can gather.
First of all, if gox is well and truly insolvent and does not recoveget bought out, I lose 10% of what I'm worth. Yes, I was one of those people 'stupid' enough to have bitcoin on mt gox. I had them there to trade with and profit off arbitrage. This entire thing caught me off guard. Even after suspended withdrawals, I continued to bet against mt gox solvency - essentially doubling my initial potential loss - because I believed the potential theft would be minimal; and even in the event of a catastrophe - mtgox would be bailed out. I personally emailed Roger Ver, who I saw buying up Gox BTCs in the bitcoin talk forums and I asked him whether he thought Gox was solvent; he said he didn't know but believed they still were. I took this as a solid signal to profit from an irrational/overreacting market. It seems that I am wrong and that the market rate at bitcoinbuilder.com prices the chance of mtgox insolvency at 89% or at least the probability that mtgox is insolvent and doesn't get acquired is 89%; assuming everyone now believes that mtgox is insolvent. I believe that people constantly berating and insulting others with no empathy for having money on exchanges is partially unfair. These people have no money at Mtgox threatened and only care about their own interests in bitcoin. Stop being so selfish and thinking of yourselves. There are reasons to have money on exchanges for people who are not certifiably retarded HODLERS. For one, you (at least in theory), offload the risk of storing bitcoins on a dodgy windows computer without having to go through the complicated, scary and annoying process of creating paper wallets. Secondly, in the event of a major bitcoin crash, you don't have to wait to sell your bitcoins - you can instantly sell them and reduce your losses. As to the situation at hand and what I believe is really going on. I have sat in the mtgox irc channels, I've read reddit and bitcointalk for hours. The clues: - The leaked crisis 'document' - The IRC MK chat records with the reporter - The latest "letstalkbitcoin" with charlie shrem - E87 - The captive and the mountain. Most recent speculation - Charlie believes that the document is real and authentic - based on his superior knowledge of the situation (a live skype call with certain bitcoin foundation members with MK's lawyer who's is not a native english speaker; this is how he attributes the language mistakes and any errors in the crisis document) - In this call, on sunday night, it had been agreed that MK would step down as CEO and resign as a bitcoin foundation member; and that Roger Ver would champion/lead/facilitate a deal with prospective buyers of MtGox - However, the crucial point is that Charlie cannot reconcile the math of the document and that it says 742,000/744,000 of the bitcoins were stolen - this would amount to 400-500 coins been stolen a day since Mtgox opened. In this long period of stability after the $266 bubble - this means that $50,000 a day is been stolen at an average price of $100 a BTC - this is not possible to not notice. - Hence Charlie, I believe correctly concludes that there is some missing variable or piece of the puzzle obviously. The missing piece: - In the IRC chat with the reporter, "[12:02] How much did you lose yourself? [12:04] Well, technically speaking it’s not “lost” just yet, just temporarily unavailable" This could mean anything. As with everything else that has come out of MK's mouth - it's tells nothing atm. Why is it temporarily unavailable? My personal speculation and theories. Sort of chronologically. 1. I don't believe they lost 742,000/744,000 or 99.7% of the btc they owned without realising it through a 'leak' in the cold wallet. By definition a cold wallet cannot leak. Furthermore, with m of n signatures required to access a cold wallet separated into multiple locations - one would definitely notice. 2. Mt Gox lost a heap of coins due to theft or incompetence and were operating fractional reserve just before the massive coin appreciation of $120 - $1200 - all of a sudden, they owed alot more than they realised. They got caught offguard by bitcoin volatility. 3. Perhaps they were then operating at fractional reserve of 10-30% ( that's when we saw massive mtgox premiums as insiders were exiting mtgox with their bitcoins at 20-30% losses just before all of this began) and then when everyone lost confidence in mtgox simultaneously, it was the bank run and a self-fulfilling prophecy that caused mtgox to collapse. They were hoping to operate long enough to make up their fractional reserve disappear with profits obviously. 4. They may have lost access to 30-80% of their cold wallet storage btc due to a technical glitch, and that's where some of the 772,000 btc are. 5. They created the crisis document in order to save themselves. Charlie believes that they are trying to market the gox acquisition to outsiders by framing as Gox is "too big to fail" and that a gox failure may lead to a complete bitcoin failure. (I don't believe this obviously). They were probably trying to leverage a consortium of big bitcoin players to band together and save mtgox - the other major exchanges, and the bitcoin foundation members. The 772,000/774,000 loss must be a complete lie or the document was edited in a way by a malicious entity to conceal the cold wallet balances. Of course, MK has not refuted this.......... 6. Somehow the document gets leaked by one of the parties involved in the acquisition of mtgox; someone that either hated mtgox, and probably shorted bitcoin for alot of money prior to mailed it to two bit idiot. 7. Mtgox suspends trading and takes his website offline, 5 min after the document releases; adding authenticity to the document. 8. Joint statement from major exchanges and players; they were all in talks behind the scenes; trying to work out how to bail mtgox out probably until the document leaked. 9. The leaked document essentially prevented the bail-out plan from every happening - it forced people to backtrack behind the scenes and perhaps may force the collapse of mtgox instead of the proposed bail-out. ... I have no idea what happens now. Concluding thoughts: I am sorry for anyone who lost money at mtgox and I am sorry that any of this every happened in general. I dont believe that there is no hope and that the chance of any recovery of any funds at mtgox is zero. I believe bitcoin will survive this and will become stronger from it - Andreas is already talking about exchanges cryptographically proving that they are solvent through the bitcoin being possible - we're back to the same thing that started bitcoin then - trustless exchange - trust being completely distributed; I don't need to trust a big exchange if they can mathematically and provably show that they have a positive net worth on the blockchain. I bought bitcoin after all of this bullshit to replenish what I lost. I actually believe the massive negative publicity may spark the next boom and that the price is being suppressed by negative sentiment. Remember, mtgox =/= bitcoin and bitcoin is anti-fragile and comes back stronger each time. Apologies for any errors and lack of references, I wrote this quickly at 3 am in sydney, australia! Good luck to you all, Wit
12-05 10:22 - 'The signs of the MtGox crash were plastered on the walls. Anyone smart knew something was about to collapse, because the system was too centralised around MtGox. The exchange was being DDOSed every single day, and while it...' by /u/magpietongue removed from /r/Bitcoin within 3-13min
''' The signs of the MtGox crash were plastered on the walls. Anyone smart knew something was about to collapse, because the system was too centralised around MtGox. The exchange was being DDOSed every single day, and while it was being DDOSed everyone panic sold. The panic sells triggered stop loss orders, and the market was being gamed that way pretty easily. The price would recover once the DDOS stopped. The "big" crash was pretty much the same thing, except this time people had also learnt that during the crashes you could sell your coins and buy coins cheaply at the base of the manipulation. I tripled my coin pile that way. All the traders were trying to play "catch the knife". When the big crash finally happened, it was pretty much over in hours. It was the most violent market reaction I had ever personally witnessed. Edit: Also the wild sense of fear that overcame people during the crash was palpable. I was scared watching the red candles grow even after I had sold. If I remember correctly there was a sticky to a suicide hotline on this sub that week. I also remember that a lot of people gloated in the aftermath, saying "of course Bitcoin was never going to work - anyone who lost their money deserves it. bitcoin is a stupidity tax". ''' Context Link Go1dfish undelete link unreddit undelete link Author: magpietongue
Hello guys, here is my dogecoin story: (3 months ago) So my friend starting mining doge because he said it is more profitable than bitcoin, so I directed my rig to doge mining. I went on this sub. What I see is every other comment filled with tipping. I simple could not understand how a community could be so generous. I had of couse heard a few things here and there about dogecoin having the best community, but I never really joined. I did have the bitcoiner's mentality that it was the best blah blah blah all other cryptos are copy cats... Anyways, I hung out a little and posted this which got tips and such. In that post I promised to make a bot as my thank you to the community. During me joining we were going through our 50k shibe parties and the announcement of doge's inflation. I never really cared about doge's inflation, so I didnt really care. Then I learned about some of /dogecoin's legends in that time like the generous silentshibe. I have my first giveaway in celebration of 65536 shibes. My first time spending doge as an actual currency- I used it a logo for my programming company (not really but I like to think so XD) at trilostudios. Then MtGox crashes, and bitcoin is in dissaray. I watch www.coinmarketcap.com in vain every day as I see widespread red. I fully switched to doge when it was worth 170 satoshis thinking it was the end of the decline :o, and still watch in vain as it drops... 150 130 110... I start to lose hope around 1 month into the decline, causing me to post this. meanwhile, the subshiber count in /dogecoin is moving as slow as a slug, and at one point we even lost 22 shibes (www.redditmetrics.com/dogecoin). While all this is happening we struggle to donate every last ounce of doge to doge4water. we actually did a good job of keeping FUD out of the front page while /bitcoin was a killer to look at. Finally out of the darkness, savethemhood emerges in dogechat, tipping 10k and 100k tips. I was at www.dogechat.com at that point but I did not get anything. Then the legendary thread by him comes out, where the first 200 or so comments got 10000 dogecoin which at the time was worth $8.50. I was lucky and I was one of the shibes who got a 10000 tip. Shibes still comment on there, I guess they figure they might get lucky :P Then he finishes our doge4water by tipping $12000 worth of doge to the foundation. After that he did a few other things but essentially dissipated, only nourishing the legend. April rolls around and this time the joke is on the tipbot with a 10,000,000 doge tip by Arcurus to mohland everyone thought was fake going through to the tipbot!! And then I starting once againg about making a bot. At first I wanted to make one that just gave out random tips to random comments, but at the time bots were a bit unpopular to /dogecoin, so I sat on it. And I sat on it. I really wanted to do something really helpful to the community, even if I did not get alot of credit for it. Meanwhile, wild posts of pineapples and jessica flew like crazy in dogecoin. A contriversial photo of jessica wearing a doge shirt gets removed from the front page (please keep that argument out of the thread, I am going to put in my 2 cents alone). At the same time a big scandal involving censorship in many popular subs came out, so an outcry grew in /dogecoin. Many people did not care if nsfw stuff was here (not what /dogecoin is about, big no no!), although in all honesty the pic was not nsfw at all and I didnt think it should be taken down. All this is stressing the mods out and 42points decided to resign as a mod saying /dogecoin is no fun anymore and too much work tl;dr. Then everyone outcrys for him back, he makes his final post to /dogecoin and leaves. Speculation occurs about whether we really have lost our friendly touch. I do an experiment: when we first began someone made a post saying only 'doge' as a title and no body, and it recieves tips, and 8 upvotes 0 downvotes. So remembering this I do a post exactly the same, and recieve 9 ups 1 down and tips too. My conclusion: we have not changed, we just got too worked up over jessica. When all this is happening the DOGECAR ( I put in in all caps get used to it!) fundraising begins, and we raise all the money. Everyone loves DOGECAR including me :) Then I take a look back about the april fools jokes and I thought of how annoying fake tips were. Then I got the idea- how about I make a bot that detects fake tips!. I put this on my bukkit list. Time goes by, and I start making the bot. I worked for hours in frustration trying to get it to work. I had my share of cursings. I put it down to rest multiple times for a few days to come back to it. Finally I get it done and do an alpha release, which is very buggy. I work on it more and more, but more bugs dangit! then of course I find myself in dogetard (plz no link) where a troll somehow finds reasons to hate me for spending hours of my time making this bot. Whatevs. Then I find myself voting for josh all day long one day because I feel so guilty not voting because my bot has been keeping me busy. Then the DOGECAR raced (yesterday hehehehe) and our shibe count goes to the moon! And I go back to fixing more bugs and adding the new commands- 'joshwise' and 'dogecar'. So, about me: I am a 16 year old ( high school sophmore) who likes to program (I have been doing it since I was 14), and do robotics. I am not a big gamer, but I love minecraft :). I made dogetipchecker so I can use when I apply for a job to show dedication, and that I like to program. Plus I will have to tell them what dogecoin is= 1 more shibe :). What I (and you) should learn from /dogecoin: I used to care too much about the price of doge, but now I really don't care. At this point even if doge was worth $0 I would still use it because I am here for the community. So maybe I will not recieve a $5000 tip from my work for my bot. Maybe I will never get tipped from this point on. I do not care anymore. I have learned a lot of valuable life lessons on here on the internet, the least likely of places that such a thing would happen. And dogecoin is going to help me be a better person, and It will probably get me a nice job in the coming years. I may not be able to send out 10000 doge tips to 100 shibes, but I have helped the community by making my bot. Little did I know 3 months ago all this would happen when I reluctantly decided to join this awesome community! Have fun /dogecoin and keep doing what we are doing! P.S I donated my 10000 doge tip to doge4cancer later on :)
Cocaine and Hookers: Flushing out the bad money - Reasons for the boom, and why the Drop is good for Bitcoin
It's been a turbulent ride these last few weeks, we've seen prices reach a peak of $266, and problems at MtGox crash a market that was sure to rise and rise were it not for technical constraints. I personally expected us to see it plateau at around $100, but as I write this we are seeing bitcoin drop to its lowest point in awhile - $56. Today is Tuedsay, which means most BTC holders with accounts at MtGox would have gotten online during work hours yesterday. We all expected a rise. So why the drop? To answer this question, first I urge you to do some background reading. British Traders Have Discovered BitCoin - BusinessInsider The business insider article above, printed last April, cites that up to 90% of London traders were actively involved in the bitcoin market "looking for a quick 2000%". This means that accounts associated with Morgan Stanley and Goldman Sachs in London and New York had amassed a great deal of bitcoin wealth (buying in as they did at around $4.88). The Telegraph Article "Financial crisis caused by too many bankers taking cocaine, says former drugs tsar" recently published in the Telegraph offers us a rare insight into what has gone so wrong in the world of finance. Crisis Caused By Bankers Taking Too Much Cocaine Says Former UK Drugs Tsar - The Telegraph David Nutt, the former UK Government drugs tsar, who was sacked after claiming that horse riding was as safe as taking ecstasy (lulz) said that too many bankers who took the drug were “overconfident” and so “took more risks” and said that not only did it lead to the current crisis in this country, but also the 1995 collapse of Barings bank. He said cocaine was perfect for their "culture of excitement and drive and more and more and more", adding: “Bankers use cocaine and got us into this terrible mess. It is a 'more' drug." So, let's rewind 12 months…At the time there were very few 'legit' online places to spend bitcoin: the Silk Road and Satoshi Circle were about the only place these traders could spend their accumulated BTC wealth. This was a marriage made in heaven - not only did bitcoin give these greedy traders the means to make 'quick 2000%'s' at the expense of those die-hard bitcoin supporters in it for the long haul, but it also provided a means for them to fuel their lavish excesses via the Silk Road, offering, as it does, a safer and cheaper alternative to buying street drugs. You can imagine them corralled around a computer, fuelled by the white stuff, powered by arrogance and greed, thinking their experience in the Stock Markets of the world would be enough to easily outsmart the neck beards that had had the audacity to enter 'their' world with the revolutionary concept we call decentralised currency. They would have course have had little regard for the beauty of the system that Satoshi invented, or it's utility for ending the senseless debasement of the lives ordinary folk, that has resulted from their mess. Hedonists seeking only highs from hookers and coke very rarely stop to look around at the problems in the world and wonder whether it could be fixed. Certainly, the majority of those traders wouldn't have perceived bitcoin as an existential threat to their way of life, and yet that is exactly what it represents. Rest assured that you can be certain that after all the media coverage of the last few weeks, if they didm't know before, they definitely know now just what a threat bitcoin poses. The wealth they have accumulated through excess and greed is under the hammer, their jobs and lifestyles are on borrowed time, and that's why we will see the price continue to drop, as they cash out - taking losses as they do - as those we lovingly refer to as The Spartans hold strong, refusing to move (for they have already won). And so, as the weak hands leave the bitcoin market one by one, they will be heading to the lifeboats on what they must surely know is a sinking ship… These are the final death throes of a dying, corrupt and hyptocritcal regime. Be certain their 'bail out' will not affect the long term stability of bitcoin. On the contrary, this will only strengthen us going forward, separating the wheat from the chaff so to speak. I wish these people the best, we are all entitled to make mistakes. Life is about learning from them and being humble enough to say "I was wrong" when you know you were. Talking of which, I believe we all owe a debt of gratitude to MtGox for the flack we threw at them during this insane period, for had the market not crashed, we may very well see prices in the $1000s right now, fuelled by those people looking to make a "quick 2000%" at the expense of others. For those traders of the "Don't be evil" persuasion who will soon be looking for a new job, may I point you to : http://www.coinsetter.com/ who are moving quickly in setting up a forex trading platform where your skills will be a good fit. As for the rest, I would recommend an extended stint in rehab.
The first post about MtGox' press release yesterday was postet on Reddit at 10:05:34 (http://www.reddit.com/Bitcoin/comments/1xicr5/new_mt_gox_press_release_feb_10_they_still_arent/) Yesterday I created two throwaway accounts /useyes_this_is_throaway and /useAchtung_einszwei. With them I posted the press release two times, once at 09:52:18 and once at 10:00:13. Proof: http://www.reddit.com/Bitcoin/comments/1xic5p/mtgox_bankrupt/ and http://www.reddit.com/Bitcoin/comments/1xicj0/mtgox_finally_issues_statement_warns_customers_of/ Both of these posts got uploaded on bitkoins.com Source: http://bitkoins.com/discussion/97531/mtgox-finally-issues-statement-warns-customers-of-potential-bankruptcy-upvote-for-visibility and http://bitkoins.com/discussion/97527/mtgox-bankrupt. Bitkoins also tweeted my posts on Twitter. However, both of my posts were downvoted due to the fact that only I could see the press release at that moment and I didn't realize that nobody else could. Of course people assumed FUD. However, shortly after my two posts /userangeoflight posted the public version of the link. Now what does this tell you? How can I have access to private information 15 minutes before it becomes public on MtGox. Ever wonder again why I posted so much about the fact that I know that MtGox is bankrupt? Of course some downvoted me and insulted me. But now - finally - I can show you all that what I say is credible. I was the first who posted about today's press release 15 minutes before it was public. Thats some hard evidence there. Now listen. MtGox is history. They became kind of a fractional reserve banking thing against their will. Exactly the thing Satoshi said would be one of the things Bitcoin should never become. MtGox has de facto - at this very moment - less fiat and less BTC than they tell their combined customer base on their website. A lot less. Which means they can be subject to a bank run. They can only survive if everybody believes that they are liquid and have enough BTC/fiat to pay back their customers. Which they don't by far. What happens next is that they are searching desperately for fresh BTC and fiat. Because once everyone finds out that people on MtGox were merely trading numbers on a screen instead of real BTC/fiat, today's crash will be nothing to what will happen next. Advice: Make yourself familiar with stopp loss orders, or take the risk to convert your BTC + Altcoins to fiat for a few days/couple of weeks to avoid all this.
Bitcoin is a good way to transfer money online. However, it's significantly from traditional payment processors such as PayPal in that it's decentralized. But what does this mean? Bitcoin is not a payment processor. Bitcoin is a currency, it is a network, it is a system. There is no "bank of Bitcoin", and Bitcoins are not US Dollars. When you transfer Bitcoins, you're not transferring USD or any other fiat currency, you're transferring Bitcoins.
What are the advantages?
When compared to PayPal, Bitcoin has a number of advantages:
Decentralized: Nobody can freeze your account (like PayPal is so prone to doing). And since it's decentralized, it's not regulated by any government. No paperwork!
Lower fees: PayPal charges a fee of 2.9% + $0.30 for international transfers. Bitcoin's fees are much lower, usually less than $0.10. More importantly, you pick your own fees. (More on that later)
No chargebacks! This is by far the largest advantage. When trading TF2 items via PayPal, you don't know if you've gotten scammed until 6 months later since the buyer can file a chargeback at any time.
What are the disadvantages?
There are only a couple of disadvantages:
Slightly slower: You don't truly have the money for about an hour.
Slightly higher barrier to entry: If you want to convert fiat to Bitcoin, you have to go through an exchange.
You're responsible for your money: If you have money in PayPal, PayPal isn't going to lose it. If they do, you can sue them. With Bitcoin, if you somehow lose access to your wallet (computer crashes, you forget a password, etc.), your money is gone.
To get started, you're going to need a Bitcoin wallet. You can either download a client application on your computer or use a web-based service. My service of choice is Blockchain.info. If you sign up there, your wallet is encrypted with your password. They don't have access to your money, but if you forget your password, all of your money is gone forever. Once you sign up, you should be taken to a screen that looks like this. The important thing to note is the jumble of numbers and letters in the center of the screen. This is your address. You'll share this address with people in order for them to send you coins. Think of it as an account number. You can create as many addresses as you want per wallet, but for the sake of simplicity, we'll stick with the one. In order to get Bitcoins into your wallet, you can either have someone send some to you (sell something) or buy some from an exchange. Mt.Gox is one of the most popular. I personally prefer Camp BX.
Once you're ready to sell an item and you know how much BTC you want to get paid, just give the buyer your Bitcoin address. They'll send their coins to your address and you'll see the transaction on the "Transactions" tab of your wallet. This is very important: Note the "confirmations" that should be displayed by the transaction. When a payment is fresh, it is "unconfirmed". That is, nobody in the network has picked it up yet and declared that "This is a valid transaction." While a transaction is unconfirmed, there is a very small chance that the buyer will be able to "double-spend" the money, preventing you from getting it. This is a guide of how many confirmations you should wait for before considering the money "yours":
Transaction Volume (USD Equivalent)
0 - 1
$10 - $25
1 - 2
$50 - $75
3 - 4
$75 - $100
4 - 5
$100 - $150
5 - 6
Ijustmadethesenumbersup,it'suptoyoutocomeupwithyourowntrustplan. The more confirmations a transaction has, the less the risk of a double-spend. 3 transactions is usually enough to ensure the funds, but 6 is the generally accepted verification number. Each confirmation takes about 10 minutes, so waiting for the full 6 confirmations will take about an hour. If a trader has large amounts of reputation, it's reasonably safe to accept lower numbers of confirmations. When sending coins, you have the option of paying a fee. The buyer always pays the fee, but they may choose to pass it along to the seller by sending less coins (if both parties agree, of course). The fee is entirely voluntary, but highly recommended. The amount of the fee is determined by the buyer. The higher the fee, the quicker the transaction is confirmed. The recommended fee is 0.0005 - 0.001 BTC (currently $0.05 - $0.10). For a larger transaction, you should generally pay a higher fee (but it will always be cheaper than PayPal!).
Converting to Fiat
You can convert your Bitcoins to fiat currency (traditional money) at a Bitcoin exchange. See the last paragraph of the "So how do I trade TF2 items for Bitcoin?" section.
PayPal is safer on the buyer's side, while Bitcoin is generally safer on the seller's side. However, by taking the necessary precautions, it's possible to make it safer for both sides. Standard cash trading rules apply. Those with more reputation should generally go first in a transaction. Middlemen are also highly recommended for high-volume transactions. With PayPal, the buyer has the dispute system to fall back on if they don't receive the items. This is not true with Bitcoin, so make sure that you're trading with someone who's very reputable. Bitcoin addresses are entirely anonymous. There's no "verified" status like PayPal has. Ensure that the person you're trading with is trustworthy. Look for the traditional signs of a scammer: fresh Steam account, low number of items in their backpack (except for the high-value ones they're selling), low hours of TF2, no reputation, private backpack. These are all signs that you may be dealing with a scammer's alt. You may also wish to take into consideration the user's Steam Level. A user with a higher Steam Level has invested more into their Steam account and is therefore less likely to risk it by conducting a scam.
Additional Help & Information
/Bitcoin is there to answer any questions you may have about Bitcoin!
The following post by ThrowAway_OfCourses is being replicated because some comments within the post(but not the post itself) have been silently removed. The original post can be found(in censored form) at this link: np.reddit.com/ Bitcoin/comments/79d20u The original post's content was as follows:
October, 2011 was when I first heard about Bitcoin. A friend excitedly told me about it, that the price had crashed, that it could be 'mined', and that it could be purchased on exchanges. He didn't own any, but he found it interesting, and so did I. I was instantly interested in acquiring some coins. That the price had 'crashed' meant a buying opportunity, and I further saw it as evidence that the system was somehow free, and had a life of its own. I did not purchase any right away, regretfully, since the coins were about $3 each. I did do some initial research, calculating mining profitability, and looking into the process for buying coins on MtGox. I also read about the thefts and hacks. I found it intuitive these incidents were matters of endpoint-security, and not reflective of a systemic weakness. Yet I would have much to learn if I was to avoid becoming a victim. I continued to casually follow Bitcoin developments, and occasionally checked the price. Eight months later I came across a Timothy B. Lee article in Forbes that detailed the Bitcoin Richlist. It was my catalyst. It was time for a technical deep dive, time to understand what gave people the confidence to entrust millions of dollars of value to the system. Of everything I read that day, it wasn't the proof-of-work that seemed revolutionary, but simply the fact that a lost private key meant the coins would be irrecoverable. That signified Bitcoin put true and total control of money into the hands of users, and for that it was different and worthwhile. I decided to invest. All that was left was working out the mechanics of the transaction. And security. I was determined to not fall victim to a hack. An offline, paper wallet seemed like the easy choice. The price was in the $6 - $7 range. My first purchase went though MoneyGram and Coinapult, with MtGox as my receiving wallet. I put in $150, and got out $130 worth of coins. The price had surged in the few days since I decided to buy, to slightly under $10 per coin. I transferred the coins off of MtGox and onto my paper wallet, and it all felt very real! I wanted to buy more, and settled on CoinFloor to avoid the hefty fees I paid the first time. CoinFloor also allowed for instant fiat funding via a deposit at a bank teller window. Depositing $900 directly into a bank account was not without risk, but CoinFloor came through and the money was credited within 5 minutes. It all went flawlessly, and soon with my 100 coins spread out over a few different paper wallets, I could rest easy, without fear of a hack. I occasionally checked the price, tested out Satoshi Dice, and read a little more on the technical underpinnings, but other than that, I mostly forgot about my Bitcoin investment for the next 6 months. Then, in early 2013, I read about a few seed rounds in Bitcoin startups, and I saw pictures of a Bitcoin booth at the CES is Las Vegas. Somehow that booth, with the Bitcoin logo, made it all seem even more legitimate. The price had climbed into the $14 - $15 range, and I wanted more coin. CoinFloor had been hacked and was out of commission. This time I would use the Dwolla to MtGox method of funding. I found myself seriously regretting not having done Gox's verification the previous summer, as the price quickly climbed while I waited. When my verification finally cleared, the price had shot up to $19, and I transferred in several thousand dollars and bought another ~150 coins. Over the next few months I kept buying until the price crossed $100 per coin. In total, I had put in about $10,000 for 340 coins. I worked part-time, with an annual income of about $25,000, so that $10,000 felt substantial. The rise to $266 was exhilarating, as was the following surge to $1242. I mostly held, but sometimes tried to time the market with a small position (always 10% of holdings or less). I sold some coins the first time Bitcoin passed the $400 mark to recoup my initial investment, and I arbitraged when it was profitable. I lost a then-painful amount of fiat on MtGox, but not any coins. I held tight during the long bear market, with absolute confidence that the price would find a non-zero bottom, and it would only be up from there. The ecosystem was growing, the technology was maturing, and investment money was pouring in, and yet the price continued to decline. I would have loved to buy more, but doing so would have been truly irresponsible from a diversification perspective. I have largely stayed away alt-coins, but I did mine-and-dump those I found annoying, and mined and held the one that I found interesting - Ethereum. I reluctantly pushed some BTC into Ethereum early this year, which turned out to be a good move. In total, over the past 5 years, I have returned about 200x on my initial investment, in the current form of about 250 BTC, about 700 ETH and approximately $300k of other liquid assets. The result is almost identical to a pure buy-and-hold from the beginning, but I felt the need to hedge as valuations changed over time. I feel no pressure to sell more coins, though I probably would convert a few in the $20k-$40k range, prices which I have long seen as likely, if not inevitable. I am in my early 30's. Ask Me Anything! Though I might only have time to answer a few…
I'm a software engineering student. Do you think I can score an internship in the world of Bitcoin? Can you help me?
I am available to work for a 4 month work term during the fall.
I am open to relocation (but would like to discuss it first before committing to anything)
For those interested, here are the details an employer must meet for my CO-OP program (school's rules, not mine):
Work term must be remunerated
Opportunity to develop your technical or soft skills related to your field of study
Work term duration between 12-17 weeks. The min. & max. is determined by the employer and not designed for vacation time
35 hours/week minimum – Full Time Monday to Friday
Students must be supervised and cannot work from home or with family members
Work term report to hand in by student & Final Employer Evaluation of the student
If you would like to reach me, or want my Resume, inbox me or send me an e-mail at [email protected] Thank you! Oli
So I jumped in bought 1.42BTC worth of GoxBTC for an average buy in @ 0.27 and there is no way I am going to sell them without a statement that there is no way I am not going to see ownership of these. Now that being said, here is my position and I am interested in what others are:
My GoxBTC is in the BitcoinBuilder wallet, I never transferred it to my Gox wallet*
I have a RealBTC and GoxBTC payout address locked into my account before all of this went down.
I decided that I was going to leave my GoxBTC in the BitcoinBuilder wallet due to the wording of this paragraph on their FAQ:
What happens to my "gox" BTC if MtGox disappears with everybody'sBTC, or decides the bitcoin builder "gox" BTC are invalid? We would do our utmost to reclaim the funds of course... but this is > exactly the risk you are taking on when agreeing to buy "gox" BTC at > a discount. Caveat emptor!
.... if Gox went tits up, which it totally finally did, that to recoup anything from this gamble my best bet would be to leave my balance with BitcoinBuilder and let them pursue getting the BTC they are owed versus me going after the 5.2244 myself. That was my gamble if this scenario played out and it totally has. What I want to know is...who was stealing the BTC and for how long...it is suggested it was for a looonnnngg time. That person must be shitting themselves laughing right now.. kind of hate you right now but gotta give you props for the heist Bro....now go eat a dick asshole!! :D Hope nobody lost the farm on this one, it was pretty clearly a hail mary throw and if caught would have roooooocccckkk haha edit: I am verified on Gox on ages ago but never really used them for trading much, just a little back after the april 2013 crash. Stuck with cavirtex and VoS.
Major Bug Found in Bitcoin Network By Largest & Oldest Bitcoin Exchange MtGox - Bitcoin Foundation Trying To Cover Up
The Bitcoin Foundation is trying to cover up the major bug that was found in Bitcoin's network by the oldest and largest Bitcoin exchange, MtGox. The Bitcoin Foundation claims that there is no such thing, but the fact that MtGox is experiencing major problems linked to this bug, reveals the lies spread by the Bitcoin Foundation. Negative confirmed news:
China banned Bitcoin
Russia banned Bitcoin
Denmark banned Bitcoin
Bitcoin will not be regulated in the USA
Bitcoin linked to criminal activities
Bitcoin extremely volatile and unreliable
Bitcoin crashed yesterday, to as low as $102 at a major bitcoin exchange (BTC-e)
FBI holds over 144,000 bitcoins. Yesterday's crash was caused by a 3-6k Bitcoin sell off, if the FBI decides to dump the 144k coins, Bitcoin WILL (inevitable) drop to below $100 USD.
MtGox: ear MtGox Customers and Bitcoiners, As you are aware, the MtGox team has been working hard to address an issue with the way that bitcoin withdrawals are processed. By "bitcoin withdrawal" we are referring to transactions from a MtGox bitcoin wallet to an external bitcoin address. Bitcoin transactions to any MtGox bitcoin address, and currency withdrawals (Yen, Euro, etc) are not affected by this issue. The problem we have identified is not limited to MtGox, and affects all transactions where Bitcoins are being sent to a third party. We believe that the changes required for addressing this issue will be positive over the long term for the whole community. As a result we took the necessary action of suspending bitcoin withdrawals until this technical issue has been resolved. Addressing Transaction Malleability MtGox has detected unusual activity on its Bitcoin wallets and performed investigations during the past weeks. This confirmed the presence of transactions which need to be examined more closely. Non-technical Explanation: A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur. Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent. MtGox is working with the Bitcoin core development team and others to mitigate this issue. Technical Explanation: Bitcoin transactions are subject to a design issue that has been largely ignored, while known to at least a part of the Bitcoin core developers and mentioned on the BitcoinTalk forums. This defect, known as "transaction malleability" makes it possible for a third party to alter the hash of any freshly issued transaction without invalidating the signature, hence resulting in a similar transaction under a different hash. Of course only one of the two transactions can be validated. However, if the party who altered the transaction is fast enough, for example with a direct connection to different mining pools, or has even a small amount of mining power, it can easily cause the transaction hash alteration to be committed to the blockchain. The bitcoin api "sendtoaddress" broadly used to send bitcoins to a given bitcoin address will return a transaction hash as a way to track the transaction's insertion in the blockchain. Most wallet and exchange services will keep a record of this said hash in order to be able to respond to users should they inquire about their transaction. It is likely that these services will assume the transaction was not sent if it doesn't appear in the blockchain with the original hash and have currently no means to recognize the alternative transactions as theirs in an efficient way. This means that an individual could request bitcoins from an exchange or wallet service, alter the resulting transaction's hash before inclusion in the blockchain, then contact the issuing service while claiming the transaction did not proceed. If the alteration fails, the user can simply send the bitcoins back and try again until successful. We believe this can be addressed by using a different hash for transaction tracking purposes. While the network will continue to use the current hash for the purpose of inclusion in each block's Merkle Tree, the new hash's purpose will be to track a given transaction and can be computed and indexed by hashing the exact signed string via SHA256 (in the same way transactions are currently hashed). This new transaction hash will allow signing parties to keep track of any transaction they have signed and can easily be computed, even for past transactions. We have discussed this solution with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized. In the meantime, exchanges and wallet services - and any service sending coins directly to third parties - should be extremely careful with anyone claiming their transaction did not go through. Note that this will also affect any other crypto-currency using the same transaction scheme as Bitcoin. Conclusion To put things in perspective, it's important to remember that Bitcoin is a very new technology and still very much in its early stages. What MtGox and the Bitcoin community have experienced in the past year has been an incredible and exciting challenge, and there is still much to do to further improve. MtGox will resume bitcoin withdrawals to outside wallets once the issue outlined above has been properly addressed in a manner that will best serve our customers. More information on the status of this issue will be released as soon as possible. We thank you for taking the time to read this, and especially for your patience. Best Regards, MtGox Team Source: https://www.mtgox.com/press_release_20140210.html
Introductory video In the past few weeks, interest in the online cryptocurrency called Bitcoin has increased dramatically, largely due to the rapidly rising price. While it is relatively simple to use once everything is understood, the initial set-up is admittedly daunting and fairly complex. Given that Bitcoin is remarkably useful as an online transaction tool, I hope to clear up some misunderstandings and outline how to quickly and safely start trading with Bitcoins. How do Bitcoins help me? Before explaining how to get started, I’ll briefly summarize why Bitcoin is so attractive for traders:
anonymous: don’t need to share your personal information to receive money
extremely low transaction fees: it is by far the cheapest way to send large sums of money instantly across borders
payments sent cannot be canceled, reversed, or charged back after they have been confirmed (takes a few minutes, verify by searching for your transaction at https://blockchain.info)
Bitcoins are deflationary: their value tends to increase over time (whether or not they are a wise investment can be debated, but so far price has risen consistently)
Alright, cool. I’m on board. So what do I do now? If you’ve decided to buy Bitcoins, the first step is to choose a wallet. A number of options are available, each with their own advantages. I personally recommend blockchain.info’s wallet, since is easy to create and for the most part hassle-free, while also providing additional security and advanced use features. If you intend to store a large quantity of Bitcoins, however, it may not be ideal for you. Now that I have a wallet, how do I buy Bitcoins? Unfortunately, here’s where things get a tad complicated, and many people shy away after experiencing difficulties. The primary reason why it is hard to buy is that it is almost impossible to buy Bitcoins using PayPal or any other method that can be charged back. In addition, nearly all exchanges and vendors require some form of identity verification prior to selling; depending on the website, this process may take up to several days. If you anticipate that you will need Bitcoins for a trade in the future, start buying them in advance! Below are a few of the more popular sites to buy Bitcoins internationally; please keep in mind that they all have different verification and funding processes, so you should research which one best meets your needs.
Bitstamp: great site for trading, and usually has decent prices
Finally bought my Bitcoins! How do I spend them? Once you have your wallet set up, but you want to transfer your Bitcoins to another account, simply ask the other person for their Bitcoin Address (it should look like a string of random characters; here is mine, for example: 1GEKaHGoauYSoEHzGj3TRL9tFqrtNA9oUt). The Bitcoins should arrive in the new wallet immediately; as the seller, however, it is important to remember to check that the transaction was confirmed on Blockchain.info (a transaction that can still be reversed will say "Unconfirmed Transaction!" in red). Of course, use a middleman when buying or selling virtual items for Bitcoins. There is no dispute process: once you send the Bitcoins, they are gone. There is an escrow (middleman) service called BTCrow, which could be cool if someone wants to experiment with it, but I have personally never tried it, and cannot recommend it as I do not know how their dispute process works. Closing notes: I started writing this guide over six months ago, but it didn't seem like too many people were interested in Bitcoins after their price crashed at the end of April. Recently many people have been asking how they work and how to invest in them, so I figured it would be a good time to finish this. Bitcoins are a very curious and exciting currency system, and though I am a zealous supporter, I urge everyone to be careful when investing. To all the other experienced Bitcoin users out there, if I missed anything, please let me know and I'll edit/expand as necessary. Originally posted in dota2trade, but who knows, maybe you guys find this useful or at least interesting. :)
The first post about MtGox' press release today was postet on Reddit at 10:05:34 (http://www.reddit.com/Bitcoin/comments/1xicr5/new_mt_gox_press_release_feb_10_they_still_arent/) Today I created two throwaway accounts /useyes_this_is_throaway and /useAchtung_einszwei. With them I posted the press release two times, once at 09:52:18 and once at 10:00:13. Proof: http://www.reddit.com/Bitcoin/comments/1xic5p/mtgox_bankrupt/ and http://www.reddit.com/Bitcoin/comments/1xicj0/mtgox_finally_issues_statement_warns_customers_of/ Both of these posts got uploaded on bitkoins.com Source: http://bitkoins.com/discussion/97531/mtgox-finally-issues-statement-warns-customers-of-potential-bankruptcy-upvote-for-visibility and http://bitkoins.com/discussion/97527/mtgox-bankrupt. Bitkoins also tweeted my posts on Twitter. However, both of my posts were downvoted due to the fact that only I could see the press release at that moment and I didn't realize that nobody else could. However, shortly after my two posts /userangeoflight posted the public version of the link. Now what does this tell you? How can I have access to private information 15 minutes before it becomes public on MtGox. Ever wonder again why I posted so much about the fact that I know that MtGox is bankrupt? Of course some downvoted me and insulted me. But now - finally - I can show you all that what I say is credible. I was the first who posted about today's press release 15 minutes before it was public. Thats some hard evidence there. Now listen. MtGox is history. They became kind of a fractional reserve banking thing against their will. Exactly the thing Satoshi said would be one of the things Bitcoin should never become. MtGox has de facto - at this very moment - less fiat and less BTC than they tell their combined customer base on their website. A lot less. Which means they can be subject to a bank run. They can only survive if everybody believes that they are liquid and have enough BTC/fiat to pay back their customers. Which they don't by far. What happens next is that they are searching desperately for fresh BTC and fiat. Because once everyone finds out that people on MtGox were merely trading numbers on a screen instead of real BTC/fiat, today's crash will be nothing to what will happen next. Advice: Make yourself familiar with stopp loss orders, or take the risk to convert your BTC + Altcoins to fiat for a few days/couple of weeks to avoid all this. Best of luck to all of you and I will do my best to keep you updated.
Mt. Gox admits DDoS attacks played role in Bitcoin crash Recent trading lags and a self-imposed closure of the world's leading Bitcoin exchange may have less to do with being "a victim of success ... Short History Lesson on Mt. Gox. For those of you that are not familiar with the name Mt. Gox. In late 2006 Jed McCaleb built Mt. Gox, which was originally an online market place for purchasing, trading, and exchanging Magic the Gathering playing cards. However, in July of 2010, McCaleb first read about bitcoin.He thought that bitcoin itself, needed an exchange to trade fiat currency with ... The trading lag problem that MtGox faced on the first day of the crash was not new; in fact, it had been present during nearly every minor flash crash on the way up to $260 since the price first broke through its 2011 all-time high of $32, with trading engine lag frequently reaching twenty to forty minutes at its peaks. Despite this advance warning, and despite the massive amount of resources ... MtGox Shutdown Bitcoin Exchange. The hole the hackers dug and dumped MtGox – the oldest and most established bitcoin exchange company – was so deep that the company wasn’t able to dig itself out of it. The breaking news come out today that MtGox shutdown its doors permanently and will no longer be a Bitcoin exchange company! After predicting this crash which saw a billion-dollar drop in bitcoin values, I was of course attacked by a full complement of bitcoin pushers who are just as deluded about bitcoin as the average American is about federal reserve notes. According to bitcoin enthusiasts, some of whom have long abandoned any attachment to actual reality, bitcoin will save human economies from collapse, bitcoin ...
Bitcoin Mt. Gox FLASH CRASH! Bitcoins at $0.01 Each - YouTube
Mt Gox CRASHES Bitcoin and Cryptocurrency Market! ($500m Selloff) - Hello everyone, todays video is about the March 7 Bitcoin Crash. The cryptocurrency market has gone through quite a crash today ... Try TRADE HILL instead: http://www.tradehill.com/?r=TH-R1323 Price crashes from $17.5 to $0.01. That i not a typo. ONE CENT. Here is the official statement f... Mt Gox still haunts us and is contributing to the panic sell-off happening in the market right now. Mix that with fear and uncertainty about what happens next for Bitcoin and you have the perfect ... Bitcoin Falls - Round Two! Whale Trader Games, Playing The Charts, Gemini, CFTC Regulations - Ep160 - Duration: 22:27. Coin Mastery 42,157 views Bitcoin Investors: I would like President Obama to bail out Bitcoin investors. https://www.change.org/petitions/bitcoin-investors-i-would-like-president-obam...