bitcoin crash

I am starting to wonder if Bitcoin and all alt-coins for that matter are just another quality product from the ACME corporation. It seems like it all looks good, they deliver on time, you set up the package, climb on the rocket, and when you light it off, it just explodes and you end up falling off a cliff.

Bitcoin (and pretty much every other coin) is nearly in true freefall at this point. It’s continuing a pattern I talked about in my Bitcoin Bubble Bursting story a few days ago. Essentially, the price of bitcoin crosses a threshold point on the way down where people have marked as a “buy on the drop” point for them. Enough people buy in over the short term to push the price of the currency back up. These are often substantial increases, only because it seems to take very few transactions to make the market move. After a little while, the price drops again, and a few more straggler buyers come in. This might cycle through 4 or 5 times, and then the escalator keeps pushing us relentlessly down. As I write this, Bitcoin has gone under $7000, which is likely going to start another 1 or 2 day cycle around this price point.

My original guess on all of this was a bottom of about $4000. I did the math on my own Bitcoin Cloud Mining accounts, and I realized that much below $4000, it’s going to be very hard for it to give me a full return within the contract period, unless something significant changes. What I realize, however, is that it might also be a trigger for others in the same sort of position, which may change the amount of processing involved. There is a great potential that companies and individuals will stop mining, as it is no longer profitable in any way. The cost of electricity may exceed the income by a long shot. If even 10% of the hash rate drops away, there is potential for the difficulty to drop, which would be better for the remaining miners.

I am starting to think my original guess we optimistic, I will not be surprised to see a sub $1000 bitcoin by Easter if not sooner. There is a point (and I don’t know where it’s at, that this drop won’t stop until we get to see a dead cat bounce, as this thing hits the bottom and bounces a bit. Zero (ie, fail) isn’t entirely out of the question anymore.

For the moment, this isn’t the case. If anything, the network hash rate continues to grow at a stupid pace, well beyond the needs which is keeping the difficulty higher and the returns for mining much, much, much lower. Combined with Bitcoin’s price dropping 60% or more in a short period of time, we are seeing an incredibly powerful pinch on miners and investors.

Side note: A couple of people asked me recently “Should I invest in Bitcoin or coins in general?”. My answer today is “Are you f—ing nuts?”. Bitcoin is nearing the status of “run on the bank”, and that is scary. With credit card companies moving to block their cards being used to buy coin, it creates a situation where less actual money is coming into the system. Bitcoin isn’t specifically a ponzi scheme, but the price of bitcoin is very much directly related to liquidity and transactional volumes. When there is no money coming in, and people are trying to sell out, you are seeing big declines.

it was reported that even Steve Wosniak sold out most of his holding is Bitcoin – he didn’t want to have to worry about the price trends. Good on him.

For myself, a simple update from Hashflare tells me all the bad news. At yesterday’s rate, it will effectively take the rest of my contract to make any income, breaking even is potentially not going to happen, especially if the coin makes it down to 4K or less.