Why is Bitcoin "digital gold" crashing right now?

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It has been stated here that one can buy from millions of items on Amazon with Bitcoin.
Given that so many people are working from home, with plenty time on their hands, would it be too much to expect that someone might use this "currency" to, you know, actually buy something?
 
Firefly said:
Would it be too much to expect that someone might use this "currency" to, you know, actually buy something?
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Not relevant in a thread that discusses a digital gold use case. That aside, it was discussed to death in the other thread. It boils down to your view Firefly that if bitcoin is not used as a means of exchange this very day, then it's toast. I don't agree - but everyone can make up their own minds.
 
Taking this back to Brendan's original query, here's an interesting thesis on the subject.

Key takeaways:

- Gold was never a true safe haven asset during the 2008 financial crisis (dropping 30%).
- Safe haven assets tend to be bought up after a bottom has been formed.


Other than that, when there are more sellers than buyers and there's a need to raise cash, bitcoin has proven to be much easier to liquidate than stocks, bonds, real estate and gold as it trades 24/7 - 365.
 
tecate said:
bitcoin has proven to be much easier to liquidate than stocks, bonds, real estate and gold as it trades 24/7 - 365.
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Eh, it might be easier to liquidate than real estate, but it has the same liquidity as the other items you mention.

Sure, I can cash my Bitcoin when the market of the other is closed, but that is irrelevant.

Brendan
 
My two Satoshi worth.

The reason why bitcoin is crashing now, and not chasing all times highs is that this stock market crash is not (yet) a consequence of financial malpractice and fraud as was the crash of 2007/8. It was out of the property loans, sub-prime mortgages, credit default swap, collateralized debt obligations gambling frenzy that resulted in the 'credit crunch' and subsequent financial collapse.
The consequences were devastating - job losses, homelessness, bankruptcies etc.
One other consequence of the financial collapse was the creation of bitcoin, a trustless peer to peer system to carry out financial transactions or transfers with in built scarcity.
It is not a panacea to protect wealth against biological pandemics that threaten to destabilize world economic output. If the world were to go into economic lockdown, Wuhan style, then the value of everything is vulnerable, including bitcoin.
Where the value of bitcoin may come into its own is how governments around the world react (the magic money trees are starting to bloom), how long and how deep the economic effects of this crisis are felt, and what (if any) is the geo-political fallout of events occurring.
 
WolfeTone said:
My two Satoshi worth.

The reason why bitcoin is crashing now, and not chasing all times highs is that this stock market crash is not (yet) a consequence of financial malpractice and fraud as was the crash of 2007/8. It was out of the property loans, sub-prime mortgages, credit default swap, collateralized debt obligations gambling frenzy that resulted in the 'credit crunch' and subsequent financial collapse.
The consequences were devastating - job losses, homelessness, bankruptcies etc.
One other consequence of the financial collapse was the creation of bitcoin, a trustless peer to peer system to carry out financial transactions or transfers with in built scarcity.
It is not a panacea to protect wealth against biological pandemics that threaten to destabilize world economic output. If the world were to go into economic lockdown, Wuhan style, then the value of everything is vulnerable, including bitcoin.
Where the value of bitcoin may come into its own is how governments around the world react (the magic money trees are starting to bloom), how long and how deep the economic effects of this crisis are felt, and what (if any) is the geo-political fallout of events occurring.
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That's a heroic effort Wolfie. However, whilst it might explain why it is not acting as digital gold, it does not explain why it is crashing. tecate has suggested some technical reasons, like folk meeting margin calls. I am not convinced. Could it be that Bitcoin has joined the establishment - if the Dow and FTSE are being dumped so too is Bitcoin.
It should be noted that Fiat has performed remarkably well, indeed far too well, over both this crisis and the earlier one. A far cry form the oil crises of the seventies which saw massive inflation.
 
Firstly, lets put this drop into perspective, there was a 6 month period about a year ago where bitcoin was well under the price its at now. It's a big drop in a short period of time, but get back to me when it's below 100 or even 1000.

Secondly this was by all accounts a weird week. The stock market is down a lot, ok people are running to safety. Ok are they running to bitcoin? no. Are they running to gold? no, gold might have had it's biggest weekly drop in 7 years. Ok, they're obviously running to bonds then right? No, the yield on 30-year and 10-year U.S. government debt dropped to their lowest levels ever. This has been a weird week in general and I'm not sure what predictions about long term behaviour can be derived from it.

Thirdly we don't know fiat will do over the crisis as it's only beginning. I'm not a finance professional so please correct me if I'm wrong but as I understand it European banks, especially Italian and Greek are not well capitalised. Both economies (and we can throw Spain in too) are heavily dependent on tourism. Tourism is finished for foreseeable future. Interest rates are already historically low, there's no where to go. What happens next? What are the chances that the bail in laws that were passed are put in to use? What are the chances that more money printing diluting the value of fiat happens? What other possibilities are there to deal with the economic downturn that's ahead?
 
Duke of Marmalade said:
tecate has suggested some technical reasons, like folk meeting margin calls. I am not convinced. Could it be that Bitcoin has joined the establishment - if the Dow and FTSE are being dumped so too is Bitcoin.
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And what of gold and its [broken link removed] The same rationale is being given - i.e. leveraged positions have had to be covered, margin calls have had to be covered. “There’s a lot of selling of every liquid asset for margin calls" (Matthew Miller - Gold market and equities analyst, CFRA).

Duke of Marmalade said:
It should be noted that Fiat has performed remarkably well, indeed far too well, over both this crisis and the earlier one. A far cry form the oil crises of the seventies which saw massive inflation.
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It should be noted that the QE experiment is ongoing and has not reached its full conclusion. CBs can't continue to magic up money without there being a reckoning. Lets see what the US jobs report is for March in a couple of weeks. Interesting times ahead.
 
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WolfeTone said:
Doesn't this suggest that investors are running to bonds? Driving bond prices higher resulting in lower / negative yields.
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Seems to make sense but then I read things like:

"Analysts at BofA, parsing weekly data from flow tracking specialist EPFR, reported $136.9 billion of inflows into cash - the largest ever. Investors withdrew a record $25.9 billion from bond funds in the week to Wednesday."
from here

Hopefully someone who knows more about this can explain what's going on.

Maybe the question is whether all the people who ran to cash this week are happy to stay there in the coming year, and if not where that cash will move to.
 
Duke of Marmalade said:
Could it be that Bitcoin has joined the establishment
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You mean, investors now place value on it?

Duke of Marmalade said:
It should be noted that Fiat has performed remarkably well, indeed far too well, over both this crisis and the earlier one. A far cry form the oil crises of the seventies which saw massive inflation.
Click to expand...

I don't really get this sentiment. Economies have 'recovered', on paper, at least. But Leprechaun economics is very much still at play. I do think its interesting to go back to peak Celtic Tiger in 2007 and compare major economic indicators with today in Ireland.
Employment figures, average industrial wage, debt to gdp ratio, inflation rate over the period etc...the obvious conundrum is back in 2007 GDP was valued at around $275bn. Today its valued at $381bn! A whopping 38% more than 2007.
Trading Economics - Ireland, GDP

What has happened, what have we done, achieved, to have an economy valued at 38% more than peak Celtic Tiger times?
In truth, this is primarily centred around rising asset and property prices. Leaving working people see the value of their wages diminish to the point that they cannot afford a home, cannot afford the rent.
This is all financial engineering at the behest of the ECB 'whatever it takes', monetary policy.
The EU and governments around the world are now moving to a 'whatever it takes' fiscal policies. The magic Fiat money trees are in season.
Bitcoin, is still 45% up year on year. Not bad in the midst of a pending economic crisis.
Time to buy some more.
 
DazedInPontoon said:
Ok, they're obviously running to bonds then right? No, the yield on 30-year and 10-year U.S. government debt dropped to their lowest levels ever.
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As pointed out by Wolfie, this means the exact opposite of what you think it does.

DazedInPontoon said:
"Analysts at BofA, parsing weekly data from flow tracking specialist EPFR, reported $136.9 billion of inflows into cash - the largest ever. Investors withdrew a record $25.9 billion from bond funds in the week to Wednesday."
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'bond funds' don't include just sovereign bonds. The outflows have been from risky bonds into treasuries.
 
DazedInPontoon said:
I'm not a finance professional so please correct me if I'm wrong but as I understand it European banks, especially Italian and Greek are not well capitalised.
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The ECB would disagree with you in this.

If you've a reputable source, post it, but it looks like something you either made up, or read in 2008.
 
DazedInPontoon said:
So what will happen in Italy, Greece and Spain?
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Who knows.

The banks publish their capital ratios on an ongoing basis, so they're very easily found. The ECB performs stress tests on them. All the results are published.

We don't need to make things up to argue a case for Bitcoin.
 
WolfeTone said:
Employment figures, average industrial wage, debt to gdp ratio, inflation rate over the period etc...the obvious conundrum is back in 2007 GDP was valued at around $275bn. Today its valued at $381bn! A whopping 38% more than 2007.
Trading Economics - Ireland, GDP

What has happened, what have we done, achieved, to have an economy valued at 38% more than peak Celtic Tiger times?
In truth, this is primarily centred around rising asset and property prices. Leaving working people see the value of their wages diminish to the point that they cannot afford a home, cannot afford the rent.
Click to expand...
Fascinating statistics. I see that there was a spiked jump in Manufacturing GDP in 2015, I suspect that is Leprechaun economics. On a technical point asset prices do not actually feed into GDP although I think rents might.
This impressive growth in GDP is accompanied by a large increase in the labour force. So whose growth is it? Is it simply down to immigration? That has certainly something to do with the housing shortage and the strain on health services.
 
Brendan Burgess said:
How else could you make a case for Bitcoin? :)
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Nothing like a genuine interest in accuracy and the truth Brendan. On that basis, I'd suggest you update the thread title to "Why are Gold and 'digital gold' crashing right now?"

A definite case has been made for bitcoin. It brings with it several advantages over FIAT money....not least of which is the fact that someone can't summarily print off $150 billion of it on a whim.
 
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