How a Wired article sent the price of Bitcoins skyrocketing
Disclaimer: I am not an economist and I do not claim to have more than a freshman level understanding of it either. Economics was not my favorite subject and I often find it perplexing. What follows is only based on observation; I may not have considered all variables (mainly due to my ignorance of them). Either way, I thought what happened was pretty interesting. If there are any errors in my assumptions or observations, please feel free to correct me.
Bitcoins are a digital currency. Bitcoins aren’t issued by a bank or a central authority. Instead they are generated by computers when they solve complex problems (for more details, go here and here). I haven’t really read all the details about bitcoin exchange rates and how the bitcoin economy works, but at the very least I know that it does follow the law of supply and demand. So when demand increases and there is a fixed supply, the price will increase (bitcoins are constantly being generated, but it appears that demand is outstripping the rate of generation).
About two weeks ago is when I first decided I would try and get some bitcoins of my own. I decided I would try to generate them and assumed I would have some pretty soon (but I obviously didn’t know the details; it’s a little bit like winning the lottery). So I joined a mining pool online at bitcoinplus. I’ve around .04 bitcoins right now (not much). This was obviously taking too long so I thought about looking into buying some bitcoins. I checked the price over a period of days, it was hovering around $8/bc. I didn’t buy any and decided to check up on it later. A few days later (on the 3rd), I checked again, and this time the price had jumped to a little over $14/bc! What caused this spike? A day later, the price spiked again. This time to about $19/bc! I wasn’t sure what was causing the spike because the price had been more or less stable for the last few weeks.
That’s when I came across this Wired article that my friend sent me. It’s about an underground website (that is also anonymous) that lets you buy any drug. The drugs are priced in bitcoins. It would seem that there are a lot of people interested in buying these drugs and therefore these people require bitcoins. I’m theorizing that this is what led to the increased demand for bitcoins and hence the spike in bitcoin prices.
The Wired article was posted on the 1st of June. You can clearly see from the following charts how the price of bitcoins jumped on that one day (it’s about a jump of 30% on the 1st). The biggest spike was on the 4th; essentially a price increase of approximately 350% in just four days! Since the 4th, the price seems to be slowly coming down. Currently it’s sitting at around a little over $18/bc. I’ll probably keep a watch on the price of bitcoins over the next few days to see what happens. I’m assuming that the demand will die down and therefore the prices should eventually come down as well. Looking into this has actually ignited some interest in me to learn a little bit more about bitcoins and the bitcoin economy.
Price: USD/Bitcoin from the MtGox Exchange from 05/01/11 to 06/07/11
Price as percent-changes. USD/Bitcoin from the MtGox Exchange from 05/01/11 to 06/07/11
Normally you hear of currency values and stock prices rising on falling based on events in the world (positive or negative). It’s amazing to see how one little thing can change the prices of commodities. In particular, I found this (bitcoin) example particularly interesting because it’s a relatively insulated economy (i.e., it doesn’t seem to be affected by factors in the traditional market).
tl;dr version: Bitcoin prices were hovering around $8/bc. They jumped to $19/bc when Wired magazine posted an article about an underground market where you can buy illegal drugs using bitcoins.
Update: I was looking at closing prices and so it was showing only prices from the end-of-day. Here’s a chart that includes yesterday’s data. The closing price was a little over $30/bc. That’s an almost 700% increase since the 1st!
Closing prices USD/bc from 5/1/11 to 6/9/11 from the MtGox exchange as a line graph
Closing prices USD/bc from 5/1/11 to 6/9/11 from the MtGox exchange as a line graph
Popularity: 8% [?]
I made a pretty picture…
… with some numbers I found on the Internet.
A pretty picture
Popularity: 4% [?]
President Andrew Jackson on Central Banks (or why the Fed is bad)
I came across a few quotes that illustrate why Central Banks (like the Fed) are bad. I think they accurately describe the economic situation that Americans face today. These are from president Andrew Jackson; the only president to abolish the Central Bank and the only president who got rid of the national debt (all emphasis is mine):
The bold effort the present (central) bank had made to control the government … are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it. –Andrew Jackson
I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country. –Andrew Jackson
Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. –Andrew Jackson
It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. –Andrew Jackson
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Why I prefer the BBC
This side-by-side comparison of the front pages of the BBC and CNN, says it all:
BBC vs CNN
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Zen Magnets vs. Buckyballs or Buckyballs, meet the Streisand Effect
Buckyballs and Zen Magnets make nearly identical magnetic toys. Zen Magnets started a campaign where they sold both sets on eBay and asked customers to compare. Buckyballs CEO responded with a legal threat, and Zen Magnets posted a video on YouTube responding to their threat, showing how to compare the quality of both the toys. Buckyballs sent a DMCA takedown notice (a completely frivolous one) to YouTube and YouTube removed the video. Zen Magnets sent a counter take-down notice, but the video still hasn’t come back up.
But no need to fear. Buckyballs is quickly going to be educated on the Streisand Effect. Here is a mirrored video:
Also, here is an mp4 for download.
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Giving toys to kids in Iraq
This is an old video; I just found it. I uploaded it to YouTube since you can’t view it on the original DVIDS site. When I was in Iraq our unit commander’s (CPT Callaway) mother sent a bunch of toys over to us. We took these toys and handed them out to Iraqi kids.
Popularity: unranked [?]
Glenn Beck is an asshole
…within the span of a few minutes, Beck implied that there are no quality medical schools in India; implied that medical care in India is a shoddy imitation of real health care; implied that the entire nation is an undeveloped backwater without even so much as indoor plumbing; and compared the Ganges River, a holy body of water for one of the world’s oldest and largest religions, to a disease…
I guess the only reason Glenn Beck is popular is because there is apparently a marketable-segment of idiots in America. You know, the morons that watch Fox News and actually believe what they hear. Glenn Beck, you are an asshole. You are an ignorant bigot and a douchebag. There are a few people that I know, that oppose the health reform. But the strange thing is that they have rather valid arguments, and even though I may not agree with them, I find them rather intelligent and well thought-out. I mean, Mr. Beck. I realize that by being an ignorant douchebag it’s beyond you to form coherent arguments but seriously… do you have to stoop to the level of offending an entire nation? Or what about the entire community of Indian-Americans?
Usually when people make arguments or counter-arguments about a topic, they usually know what they’re talking about because they’ve researched the topic thoroughly. Oh wait. That’s only if they have a proper show that actually discusses political topics with valid arguments instead of gleefully bending over for the lunatic far-right and being their sockpuppet. Hell, I probably shouldn’t blame you. You are making money after all, even if you have to sell your soul for it. No, your show is a circus and your arguments are bullshit. Even still, I find it appalling that you would denigrate an entire nation and community. You may not think much about Indian doctors, but they seem to be a successful and well-respected bunch in India, with a large number of satisfied customers. In one fell swoop you’ve insulted the cultural and religious sentiments of Indians, you’ve made light of the sweat, blood, and tears of her doctors that strive to serve their nation (and who have migrated to other nations, including *gasp* the United States and serve Americans), and you’ve implied that India is some backwater country without any sort of facilities. Sure, India is no United States and it has a long way to go, and even though you may have the right to say whatever the hell you want, it’s really, really bad form to make fun of a country and her people. You xenophobic, ignorant, douchebag. I find it surprising that even you would stoop this low for ratings.
You sir, are an asshole.
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Telengana
I was reading the BBC on Thursday and was surprised to find that India is going to create a new southern state out of the existing state of Andra Pradesh. I knew that at least one new state had been created in the last decade (the actual number is 3: Chhattisgarh, Uttarakhand, and Jharkhand). I didn’t think much of it, but my interest was piqued and so I read the article. To be completely honest, I don’t have a strong opinion on the subject, except for one thing: Hyderabad is going to be the capital of the new state. Hyderabad is a very important Indian city. It’s kind of like an Indian Silicon Valley and several Fortune 500 companies have their offices there. It’s a prosperous, modern, and hi-tech city.
Now some background. After reading the article about Telengana on Wikipedia, it seems that when the states of India were being re-organized along linguistic lines by the State Reorganization Committee, they were not in favor of merging the Telengana region with the Andra region due to economical disparities. The Central government decided to ignore the SRC recommendations and performed the merger anyway (perhaps using the reason that both areas spoke Telugu, and so there was no reason to split them). As was to be expected, over the past few decades, the Andra region has prospered whereas the Telengana region is still economically underdeveloped.
It would seem that in principle, there needs to be a separate state. However, I’m not so sure of the wisdom of handing over Hyderabad to a fledgling state. It will take time to create a new state-machinery and I think that Hyderabad could suffer in the process. In addition, the city is going to a state with an untested and nascent administration (obviously, because it’s a brand new state). So… maybe not such a great idea. On the general topic of creating more states in India (as a result of the imminent creation of Telengana, many other groups are agitating for their own states) I don’t really have a well-formed opinion. Maybe it’s a good thing – you can have more focused state-administrations and better management. However, the side-effect is increased fragmentation. The last few governments in India have been coalition governments formed with the support of regional parties. Creating more states is probably going to create even more regional parties and it’s not going to help the situation.
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The definition of ‘glennbecking’
glennbeck⋅ing /glɛnbɛkɪŋ/ [glenn-beck-ing]
-noun
The act of making unsubstantiated, inflammatory, usually derogatory, polarizing, and ridiculous statements about a person, organization, or country and then claiming or suggesting that the statement is true, because the subject [of the statement] hasn’t denied the statement.
Examples
- Many sources claim that Glenn Beck raped and killed a young girl in 1990*. However, Glenn Beck has done nothing to deny these claims or even clarify the matter. Does this suggest that he is guilty? Perhaps.
- Some sources claim that President Obama is very much like Hitler. He has done nothing to deny these claims. Does this suggest that he is like Hitler? Maybe.
- Joe: Dude, Sarah is a total slut. Some sources say that she has had sex with over 100 guys. She hasn’t done anything to deny these claims.
Brett: Dude, Have you even talked to Sarah about this?
Joe: No.
Brett: Has she even had an opportunity to address your ridiculous claims?
Joe: No.
Brett: Do you think she actually cares what a loser like you thinks, or says?
Joe: Probably not.
Brett: Then quit, dude! Stop glennbecking! That’s just a total douchebag thing to do!
Joe: You’re right. Glennbecking is a completely douchebag thing to do!
*See http://gb1990.com/.
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