CRASH!

Bitcoin peaked at $266 today.  After that it bounced around ~$250 for awhile before starting to crash.  The crash was gradual at first, but became a panic sell as mtgox choked and died.  With trade lag of over an hour, mtgox has become completely unusable for anything other than panic selling.

Personally, I welcome a correction, I think it will allow for higher bitcoin value in the follow months and years, but the mtgox lag makes this unbearable.  I wanted to sell a few of my "play" bitcoins to get some USD into my trade account around $200, but with the engine lag this was impossible.

Some suspect the lag isn't just mtgox being mtgox.  Other exchanges were also lagged and difficult to use.  Even the bitcointalk.org forums were unusable at times.  Was it a criminal DDOS attack, or just too many people trying to find out what was going on at once?  In either case we need strong infrastructure.  More forums, more exchanges, etc.

I'm just going to wait it out and see where things go.  I foresee several possibilities.  There could be a very fast recovery and bitcoin value could even exceed the $266 high in a day or two.  There could be a fast partial recovery, as investors scramble to buy the cheaper coins, but value might take some time to fully recover.  Or there could be several months or even a year of depressed value and gradual loss of value in bitcoin.  The possibility I don't believe could happen is the death of bitcoin.  It's come too far and it's been invested in too much to simply die out for no reason. 

mtgox.com, Bitcoin's Greatest Foe

Original known as "Magic The Gathering Online eXchange", mtgox.com has become a huge annoyance to bitcoin enthusiasts.

Because it was the first exchange to gain major acceptance, mtgox has become the de facto standard for bitcoin value in USD.  While the exchange fee of 0.6% seems generously low, with the volume of transactions going through it every day the website is making a small fortune.

The problem is not the fee, but rather what is being done with that money.  For all the money that mtgox.com is taking in, the service is failing to scale adequately.  At times, once or twice a week on average, crippling lag infects the trading engine.  We are talking hundreds of seconds of lag, sometimes five or more minutes of delay.  This invariably causes a panic among traders, and bitcoin value briefly crashes.  When the lag clears up, value eventually returns to it's previously level, but this is not a consolation for those who sold low during the slowdown.

In addition to the database engine lag, there is currently a line of over 15,000 users waiting for account verification, with estimates of a week or more for a new user to get verified.  Without verification you can't withdraw or deposit cash.  This is exasperated by the fact that bitcoin value is rising so fast.  For example, you attempt to verify your account when you have $5000 ready to buy 25 bitcoin for $200 each. When your account is finally verified a week later, you find that you can only purchase 15 bitcoin because value increased to $330.  You  lost out on 10 bitcoin due to mtgox's incompetence.

What is the solution?  A better exchange.  Or better yet, multiple better exchanges.  Competition is good.  Mtgox being the default go-to for bitcoin exchange and valuation is unhealthy and bad for the bitcoin community.

This image is already outdated, $81.75 is the current high and last trade was for $81.  Just another milestone on the way to $100, which itself is just a milestone on the way to much higher values.

I'd like to start posting here more often, maybe this short post will inspire me to post more in the following weeks.

WordPress Accepting Bitcoins

http://en.blog.wordpress.com/2012/11/15/pay-another-way-bitcoin/


WordPress is now accepting bitcoins, this is a huge step forward.

Absent

I've been absent a long time, but I've recently gained a renewed interest in bitcoins- and writing about them.  Expect more posts soon.

Deflation, not so much.

My "Deflation" post predicted certain numbers which are not even close to what actually occurred.  I am not too concerned- those numbers were sort of a dream best-case scenario.  I do still believe that BTC value will increase in time on a longer scale, but I have come to realize an error in my previous assumptions.

Currently, bitcoins are not truly deflationary.  The simple fact that 50 new bitcoins are generated every 10 minutes or so causes some inflationary pressure.  The influx of new blood into the BTC market provides deflationary pressure.  For a time, the new blood overwhelmed the mining of coins and we had deflation, but in the last few weeks things have been mostly in equilibrium- value has hovered around $14-$15 for the last week.

I still hold my opinion that BTC are deflationary, but that aspect depends on future production reduction of BTC.  For now, there may be no deflation.

Withdrawn

I originally planned to leave all my BTC as BTC until at least the end of the year, however I decided to limit my risk by making a purchase with them.  Approximately 34 BTC later, I have a $540 newegg.com gift card.

Since I am unsure about mining long-term, I purchased a 990FX motherboard which will serve a second purpose later, as host to an AMD bulldozer CPU :)  I also bought a high-end power supply, some RAM, and a cheap CPU for mining.  Along with some 5830s I previously rescued from a newegg.com sale, I will make a triple 5830 based mining rig.

In other news, mtgox.com suffered from a bit of an incident yesterday.  A hacker dumped over 250k BTC on the market, tanking the price down to $0.01 per BTC briefly, and attempted to steal as much as he could given the $1000/day limit.  Mtgox has since shut down to clean up the mess and revert all trades from the big sale on.  Mtgox is reportedly still working on fixing things, so tradehill.com has become the exchange of choice.  However, tradehill has been nearly unusable due to lag, it seems that they were not completely ready for the load of the entire bitcoin community.