About two weeks ago, I started mining bitcoins. I know I am not going to gain a huge profit, but its an experience that I feel I needed. I have a large amount of spare CPU and GPU cycles laying around, so I decided to give it a try. Then there was a market crash.
Throughout the two weeks that I have been mining, I've been monitoring Mt. Gox for the current market value of the bitcoins. I remember seeing the trade price going higher and higher and I though to myself that this doesn't seem sustainable. Then the market crashed. Although some media outlets talk about how big of a crash it was compared to the pre-crash value, it wasn't that bad of a crash. The post-crash trading price was still almost double the trading price when I first started mining two weeks ago.
To me, the crash means two things to me. First, the market is really volatile. As an investment platform, bitcoins prove to be high risk/high reward. The rollercoaster that bitcoin just went through is the same pattern that other high risk/high reward investments go through. This is just simple economics. The second thing this means is the market is ripe for manipulation. This crash was caused by a DDoS to try and manipulate the market to make money. Since the bitcoin money supply is regulated by an algorithm rather than a central policy maker, the rules governing the money supply can't be altered. This was the original point of bitcoins: no person can directly manipulate the money supply. Unfortunately that opens up the currency for indirect manipulation. Because bitcoin doesn't have a defense against this type of market manipulation, I think this will be the ultimate downfall of bitcoin. Bitcoins will have a legacy that will live beyond the currency, however.
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