All posts in “Bitcoin”

The Winklevoss twins may have lost A LOT of money on Bitcoin

Cameron and Tyler Winklevoss have a lot of bitcoin, but the coin is crashing.
Cameron and Tyler Winklevoss have a lot of bitcoin, but the coin is crashing.

Image: Theo Wargo/Getty Images For US Weekly

With Bitcoin crashing, some cryptocurrency HODLers are hurting. That might include the Winklevoss twins. 

Tyler and Cameron bought 120,000 bitcoins in late 2012 with money from the $65 million payout from their lawsuit against Facebook.

That’s more than $1.32 billion worth of bitcoin at Wednesday evening’s value of about $11,000 per bitcoin. That seems like a lot, but just two days ago a bitcoin was worth $14,000. 

Here’s the chart on Bitcoin since 2012. Up and up and up. 

Bitcoin's value since January 2012.

Bitcoin’s value since January 2012.

Image: coindesk

But then this week, it’s been down, down, down. 

Bitcoin this past week has been rough.

Bitcoin this past week has been rough.

Image: coindesk

If you do the math, if the twins held onto all of those 120,000 bitcoins, they’re down more than $350 million in just a matter of days.

But that seems like nothing if you look at how much they’ve earned since buying the bitcoins for about $10 a piece back in 2012. Overall, Bloomberg estimated, they’ve seen their personal fortunes drop 37 percent in the last month. 

There’s a chance, however, that they’re HODLing on tight. Last year, they told the New York Times that they aren’t selling their Bitcoin no matter what, saying, “We still think it is probably one of the best investments in the world and will be for the decades to come.”

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HODL becomes a rallying cry in the midst of cryptocurrency crash

Cryptocurrencies are crashing. People are panicking. 

The crypto faithful, however, abide by one word: HODL.

HODL, an intentional typo of “hold,” has become the rallying cry for cryptocurrency traders in the face of this recent Bitcoin crash, which has extended to other popular coins like Ethereum and Litecoin. 

It’s an instruction for traders to, um, “hold” their Bitcoin instead of selling it. 

There’s a certain emotion to it, pointing to the steadfast belief of some that blockchain-based currencies will change the world — and generate a lot of value for people holding crypto along the way. “HODL” is being tossed around by the crpto crowd the way U.S. soccer fans chant “I believe that we will win.

The term HODL isn’t brand new. It has popped up in the midst of other Bitcoin crashes, and is being employed this time to stave off catastrophe, too.

Google Trends shows how search interest has spiked for HODL in recent months.

In the past couple days, HODL has proven more important than ever. 

Bitcoin’s dramatic rally in 2017 moved the cryptocurrency from weird internet quirk to mainstream phenomenon. The blockchain-based currency started 2017 valued under $1,000 and finished the year close to $20,000.

In recent days, however, bitcoin has crashed back to… well, closer to $10,000. That means plenty of people have made money, but a lot of people who bought into the cryptocurrency in hopes of a similar rise in 2018 are (at least thus far) disappointed.

Enter HODL. The term is now being used by people who have decided not to sell during the recent crash as well as a kind of advice against reacting to the dramatic swings of cryptocurrency prices.

But why the intentional typo from “hold” to “HODL,” you ask? Because the internet is a quirky-ass place. And because bitcoin was born here! So Wall Street can take its correct spellings and shove it up their Brooks Brothers Butts.

HODL comes a now-legendary message board post entitled “I AM HODLING.” The screed came from what appeared to be a very drunk man in the midst of a 2013 Bitcoin crash.

Internet slang and lingo has long embraced misspellings that tend to happen when typing. The early blog generation — the LiveJournals, Xangas, Hipster Runoffs of the internet — invented the “teh,” the unnecessary pluralz, the always lower case “i’s” and u n mes. 

But few pieces of slang have become a rallying cry like HODL.

There’s plenty more crypto slang where that came from. A quick crawl through the internet yields a few more:

Shills: these are people who endorse altcoins without anybody asking their GD opinions. From what I can see, there are plentyyyyy of shills about.

Nocoiner: u if u don’t buy into crypto. Or, a derisive term for people who missed out on buying Bitcoin, and are now sad and bitter. You also are a frequent experiencer of something we here at Mashable like to call “SchadenCoin.”

Shitcoin: (BOY THERE SURE ARE A LOT OF COIN TERMS IN HERE) An altcoin that becomes worthless, or is a scam. You can still make money on a shitcoin, as long as you’re in and out at the right time.

Pump and Dump: This isn’t a phrase native to cryptocurrencies, but has become part of the conversation due to the aforementioned shills. A “pump and dump” refers to buying up a bunch of coins, talking up how great the coin is, and then selling it if the price rises. 

Bag Holder: Don’t be this dude! Someone who buys during a high and then has no opportunity to sell without losing money, so he holds onto his bag for an eternity.

BUT HEY, according to the HODLers, even for bag holders, HODLing is the safest thing you can do. Happy HODLing!

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This cryptocurrency correction is a good thing

If you own Bitcoin, Ethereum, or pretty much any other cryptocurrency, your portfolio isn’t looking very good today. And you’ve probably gotten your share of smug looks from folks in the office who’d always said this crypto thing is a scam. And I bet you’re also sick of the crypto-faithful telling you to HODL (aka “hold”). 

My portfolio is also a sad sight today. But as I’m looking at the double digit red numbers next to the names of the coins I own, I mostly feel relief. 

Nobody likes to lose. And yeah, it would’ve been nice if Bitcoin, Ethereum, and other good and interesting projects in the cryptospace continued their moon mission until everyone that owns but a single coin is rich. But the growth in the past year has been so insane — as documented here, here and here — that this could only end in two ways. 

One is a correction, which is what’s happening now. Prices are going down and people are selling their coins, but the pace at which this is happening is reasonable considering the prices rose equally as fast. At some point, an equilibrium between buyers and sellers will be reached and, unless we get more bad news, the growth will return, hopefully at a saner pace. 

The other option is a total market crash — the type that could happen on news that, say, Bitcoin has been banned in the U.S., or that the operators of a major exchange has exit scammed their customers, stealing all their money and moving to the Bahamas with their Lambos. Or it could simply happen because the market is blown out of proportion — market crashes often happen with few warning signs; maybe a tiny bit of bad news and poof, it’s all gone. 

If such a crash were to happen, Bitcoin or Ethereum wouldn’t be down 15, 20 or 25 percent in a day. They’d be a lot lower, and you couldn’t even check the prices because the exchanges and the price tracking sites would all be down. 

The fact that the market has corrected makes the fictional scenario described above less likely. Financial markets are often described as pressure cookers; if you heat it up but don’t release the pressure every now and then, it might explode. 

Was the pressure too high in the cryptocurrency market? Were the prices overblown? At any given point, you’ll find people who’ll tell you that the growth is just starting and that this will be a multi-trillion dollar market (and if we reach that point, a multi-quadrillion dollar market). And you’ll also find people who’ll tell you that bitcoins and ethers are worth nothing, and that all of 2017 has been a crazy dream. 

There have been, however, numerous signs that the prices were too high. When Bitcoin surged past $2,000 for the first time ever, just eight months ago, I spoke with several experts who said the market was overvalued. When the cryptocurrency market cap reached $500 billion for the first time, Ethereum co-founder Vitalik Buterin pointed out that cryptocurrency projects haven’t really fulfilled their lofty promises. 

That was exactly a month ago. Right now, after two days of intense selling, the total market cryptocurrency market cap is almost exactly at the $500 billion point again. And Buterin’s points still stand. 

I won’t tell you to buy or to sell. On one hand, several projects in the cryptocurrency market look very promising. Ethereum has established itself as a platform for funding and kickstarting new crypto-projects. Monero and Zcash offer, or aim to offer, fully anonymous blockchain transactions. Early-stage projects like EOS and Cardano claim they’re working on platforms that are faster and more secure than Ethereum. An upcoming project called Orchid aims to end surveillance and censorship on the internet; another, called Raiblocks, offers fee-less, ultra-fast, scalable transactions. There are dozens of others that are equally as interesting. 

On the other hand, the cryptocurrency market is still ripe with scams, pump and dump schemes, and abundant with misinformation. Bitconnect, a cryptocurrency lending platform that looks suspiciously like a pyramid scheme, shut down Tuesday after cease and desist letters from both Texas and North Carolina securities regulators. It’s bad for the people whose BCC tokens are now worth next to nothing, but it’s probably healthy for the market in the long-term. There’s a lot of talk of regulating the cryptocurrency market — in China, South Korea, the U.S. and elsewhere. As long as the rules are prudently designed, this is probably a good thing, too. Pointless, half-baked and downright scammy projects should go down in flames. Good projects should thrive. 

However, if the market gets blown out of proportion again (and then some more) it could all end in a crash from which it’ll take years to recover. This, in turn, could hurt the projects that are actually good. If you’re really bullish on Bitcoin, Ethereum, and this exciting space in general, you should be happy that the prices are getting a reality check. 

Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH. 

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The Bitcoin community reacts to crash

Down it goes.
Down it goes.

Image: NurPhoto/Getty Images

Bitcoin and other cryptocurrencies crashed hard, and many people aren’t taking it well.  

Down from the near-$20,000 highs of early December, Bitcoin plummeted 25 percent on Tuesday to as low as $10,194. This hasn’t gone over so well with those who poured their life savings into cryptocurrency. 

Just how bad is it? Well, at the time of this writing, a post providing the phone number of the U.S. National Suicide Hotline sat at the top of the cryptocurrency Reddit

Image: reddit

Importantly, it’s not just Bitcoin that’s down. Everything from Ether, to Ripple, to Bitcoin Cash, to Litecoin is presently taking a bath.

Notably, according to several Redditors, this is not the first time a suicide prevention post has made it to the Bitcoin subreddit — one commenter even went so far as to call it a “meme.” And while this all may seem rather silly to people who haven’t taken out second mortgages to buy digital currency, for others this is truly no laughing matter — hence the posting of the aforementioned phone number.

And while the reasons for this downturn are varied and not entirely clear, the responses have mainly coalesced into two categories: HODL (i.e. brushing off the losses and waiting it out) and oh shit. It’s the latter that has garnered the attention of the so-called nocoiners. 

Others, perhaps not as worried about the loss of money, are grappling with different concerns. One post on r/bitcoin, titled “possibly the worst thing about this crash…,” laments that the latest downtrend is bad for reasons other than the red in everyone’s portfolio. 

“All the shit I have to hear in the office,” the post complains. “The god damn ‘i-told-ya-so’ from John,” it continues. “Yea ok mate, if i need a status update on that box of donuts in the break room, you’re my go-to guy.”

Meanwhile, despite it all, the jokes flow

Which, well, in the face of potentially staggering financial losses, it probably is best to keep a sense of humor. And, of course, reach out for help if you need it. 

If you want to talk to someone or are experiencing suicidal thoughts, text the Crisis Text Line at 741-741 or call the National Suicide Prevention Lifeline at 1-800-273-8255. For international resources, this list is a good place to start.

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Researchers find that one person likely drove Bitcoin from $150 to $1,000


Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman have written a fascinating paper on Bitcoin price manipulation. Entitled “Price Manipulation in the Bitcoin Ecosystem” and appearing in the recent issue of the Journal of Monetary Economics the paper describes to what degree the Bitcoin ecosystem is controlled by bad actors.

To many it’s been obvious that the Bitcoin markets are, at the very least, being manipulated by one or two big players. “This paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired,” the researchers wrote. “During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”

The team found that many instances of price manipulation happened simply because the market was very thin for various cryptocurrencies including early Bitcoin. “Despite the huge increase in market capitalization, similar to the bitcoin market in 2013 (the period examined), markets for these other cryptocurrencies are very thin. The number of cryptocurrencies has increased from approximately 80 during the period examined to 843 today! Many of these markets are thin and subject to price manipulation.”

The manipulation happened primarily via two bots, Markus and Willy, that seemed to be performing valid trades but did not actually own the bitcoin they were using. During the Mt. Gox hack a number of these bots were able to create fake trades and make off with millions while manipulating the price of BTC.

The publicly reported trading volume at Mt. Gox included the fraudulent transactions, thereby signaling to the market that heavy trading activity was taking place. Indeed, the paper later shows that even if the fraudulent activity is set aside, average trading volume on all major exchanges trading bitcoins and USD was much higher on days the bots were active. The associated increase in “non-bot” trading was, of course, profitable for Mt. Gox, since it collected transaction fees.

But the Willy Bot likely served another purpose as well. A theory, initially espoused in a Reddit post shortly after Mt. Gox’s collapse (Anonymous, 2014b), is that hackers stole a huge number (approximately 650,000) of bitcoins from Mt. Gox in June 2011 and that the exchange owner Mark Karpales took extraordinary steps to cover up the loss for several years.

The bottom line is simple: if Bitcoin wants to be taken seriously it probably should be this easy or legal to manipulate the markets. While decentralization is supposed to replace regulation it’s clear that there is still a way to go before it can be truly taken seriously. “As mainstream finance invests in cryptocurrency assets and as countries take steps toward legalizing bitcoin as a payment system (as Japan did in April 2017), it is important to understand how susceptible cryptocurrency markets are to manipulation. Our study provides a first examination,” write the researchers.

Featured Image: Bryce Durbin