Bitcoin Plummets 50% After Hitting $250

Bitcoin Falls 50% After Touching $250

In April 2013, bitcoin was trading at $125, half of the $250 peak reached weeks earlier. The thread discussed the 50% crash and exchange problems, with warnings that money was not safe on platforms. The discussion, spanning thousands of messages, reflected many of the sector's issues.

From $0.5 to $250: The Valuation Debate

The cited journey was from $0.5 to $250. For one forum user, there was no clear criterion for valuing BTC: most were stored, with only a minority circulating as currency. Based on this, the discussion debated whether the price depended on the next buyer willing to pay more.

One participant warned then that bitcoin was not a typical "digital currency" but a product operating as a quasi-currency, lacking banking integration. This lack was pointed out as a serious risk for its use as a monetary system.

Porsche Cayman Sold for 300 Bitcoins: From $60,000 to $28,000

One of the episodes mentioned was a car owner who sold his Porsche Cayman for 300 bitcoins, thinking he was getting about $60,000. With the price around $28,000 for those 300 bitcoins, the car had effectively cost the price of a low-end utility vehicle, according to the comment that brought it up.

The problem, some pointed out, was not just the Porsche buyer but measuring wealth in an asset that rapidly changed value.

Exchanges Collapse, Funds Vanish

The biggest fragility wasn't the price but the infrastructure, according to the thread. Of over 11 million bitcoins in circulation, about 3 million were deposited on MtGox, according to one user. Bitcoinica, Crypto-X-Change, and Bitfloor left their depositors with no funds or only dribs and drabs; the closure of bitcoin-24 was cited as the latest warning.

The uncomfortable conclusion drawn was that holding funds on an exchange was akin to playing Russian roulette. Not only did one have to guess the price direction; one had to win an extra amount, as one user noted, to cover the possibility of the platform closing and losing everything.

DDoS Attack on MtGox: When Attacks Backfire

Amidst the turmoil, MtGox suffered denial-of-service attacks. The paradox discussed was that the attack proved costly: the drop to $95 on Bitstamp and $110 on BTC-e created a buy wall of over 2,000 bitcoins at $110. When the price rebounded from $111 to $122 with several price gaps, those expecting to buy cheap found the market turning against them, according to thread messages.

Within hours, the balance was almost the same as before the attack. An episode that, for some users, reinforced an uncomfortable idea: this wasn't just nervous amateurs; strong hands were also at play.

Currency or Tulip? 78% Held "Under the Digital Mattress"

A study cited in the debate provided the figure of 78% of bitcoins not in circulation. They were held, not used for buying or selling, and according to one user, this left the asset's real economic support near zero. Most of the large transactions recorded on the chain also came from a single payment made almost two years earlier, according to the same cited study.

There were counterexamples, of course. Foodler announced it accepted bitcoins at 12,077 restaurants in the United States and a few locations in Spain. But for some participants, the gap between theoretical promise and everyday use remained enormous.

Could the Fed Crash Bitcoin by Buying the Market?

The question loomed: if bitcoin truly threatened official currencies, would it be enough for a central bank to buy up everything on exchanges to sink it? The opposing argument was logical: even if someone bought the 3 million bitcoins deposited on MtGox, 8 million would still exist in private hands, safe from any seizure, according to one user.

This is the key difference from gold, which can be confiscated with a court order and a home search, that user added.

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The market stabilized around $110-125, with BTC-e at $110, Bitstamp at $119, and MtGox at $120, according to thread messages. The underlying question remained unresolved: what is the purpose of an asset whose majority does not circulate and whose value depends on the next wave of buyers, as some participants argued. The analysis ended there.