Topic: Should we be worried about bitcoin value drop? (Read 1916 times)

Great post...yet again, Melbustus!

Just get out now and forget about it, why bother? This a game of patience.

The problem is, the value rise to $1300 makes a lot of people enter into mining and crash the profitability of it. Now it has drop back 3x causing profitability dead completely..

If there was a value drop, then yes.

There hasn't been a value drop though, just a minor price drop.

Bitcoins are still worth 4 times as much as they were a year ago.

You are in too much of a hurry for this kind of investment. If you bought in at $600 you could see how volatile bitcoin's price has been in the past, and will continue to be, despite the long term exponential trend.

What was all that talk about bitcoin being a store of value again?

People make bad investments all the time. Bitcoin can go to $1, or less, and the fact is, the protocol will work the same as ever.

Bitcoin is love, bitcoin is life.

Guy who was getting out at the time you were buying, has spent it on the new BMW.

Bitcoin is very much an investment right now. It can be used as money the same way you can trade an ounce of gold for some item, but gold is not money and Bitcoin is not money. It could be in the future (gold used to be money) but neither are right now.

Yes, you should be worried and you should sell everything, because it will drop much more

Assuming the market cap is in USD while transaction fees are in BTC, which miners then convert to fiat (taxes/electricity), discussing profits in USD seems appropriate.

Miners' profits should be dependent on a delicate equilibrium between a transaction publishing bottleneck decreasing Bitcoin's USD exchange rate and being able to demand higher fees, assuming people have a demand for transaction speeds. Any single miner controls a market share of potential transaction publication. Therefore any miner should be able to cause a percent increase in average tx fees as a function of USD by limiting the number of transactions published. Whether or not this sort of strategy can increase their overall profits is dependent on their market share and the demand for quick transactions at that particular time. I suspect quick tx demand shifts on a 24-hour scale. Just another reason to be concerned about concentrated mining pools.

An increase in nominal BTC profits would be very easy in this scheme, depending on market share.

Example: OPEC doesn't control all of the oil. They don't even control most of it. They still manipulate prices to increase their profits by limiting their supply.

I certainly agree with this.  And if the total value of daily transactions is high enough then I'm not necessarily against an increasing transaction cost when we encounter the blocksize limit.

On the other hand...

If, as you point out, the "market cap and average BTC per address directly affect how much wealth can be transacted through Bitcoin in any given period of time" then a low market cap or low average BTC per address will result in a lower limit on the amount that users are willing to spend on fees per transaction. As such, the only way miners would be able to increase their net income would be by increasing the maximum blocksize.

You are correct, I'm not trying to FUD despite being a bit pessimistic. Just pointing out some obvious logical flaws. However I also feel inclined to point out that miners might not want to increase block size, since keeping a constant supply against increasing demand would cause an increase in transaction fees and therefore profit. There are likely many soft limits like that which we will encounter in the future.

Again, not trying to FUD. Bitcoin is secure, these issues come up long before any casualties.

Price drops and rises happen. I've always said that you should consider bitcoin capable of going up 1000% or down 90% rather quickly, at any point. This is a new asset class that merges technology, finance, economics, and (arguably) politics into one beast. The price-discovery for such a thing is necessarily going to be brutally volatile.

Just keep assessing the fundamentals and forget about the price for a decade or so.

When you deposit a paycheck into your bank account do you consider that an "investment" in dollars?

Bitcoin is not an investment. It is money.

Fortunately we aren't anywhere near the limit, and we can adjust the limit in the future if we encounter it and there is enough agreement from the community.

As do I thats why I believe long term holders will be the ones who will reap large rewards and never have to convert it back to fiat.

This is incorrect. The concept "works" but for practical purposes Bitcoin does not.

A) Bitcoin, with its existing 1MB limit on blocks, is limited to 7tx/sec (according to Bitcoin Wiki). Bitcoin's market cap and average BTC per address directly affect how much wealth can be transacted through Bitcoin in any given period of time. Therefore it directly affects how well the Bitcoin system can function as a payment processor.

B) Bitcoin's functions are very much price dependent. For instance, a multi-billion dollar corporation would not view Bitcoin as a suitable substitute for wire transfers if the market cannot absorb the entry and exit of a corresponding amount of wealth without vast price fluctuations.

There's a feedback mechanism here that too many people are too willing to ignore. These are some of the basic reasons that people expect Bitcoin's price to grow exponentially at some point, and not in the sense of a bubble. Needless to say, Bitcoin may currently be overvalued and continue to crash. However I believe it is too soon for a serious crash and would expect such a crash to occur when the FED (US/Japan in particular) begin tightening their monetary policy.


Therefore I would expect Bitcoin exchange rates to exhibit strong momentum around certain price points, depending on the economy's stage of growth. A decrease begets a decrease.

Only invest in what you can afford to lose!

Bitcoin price never bothers me because I believe in the technology!

Don't "invest" into a highly volitile, highly speculative, and extremely risky asset such as bitcoin funds that would be devastating to "lose".

The answer to this question is the same to your question about worrying about value drop. Did Bitcoin's technology change in the past 24 Hours? No

Simple answer in this case is, No, don't be worried about the price drop. I could care less, I would care if this price drop was in correlation to a change with how Bitcoin works, I don't really care what people are trading its value at. I intend to the coins I own in their pure form