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The bitcoin roller coaster, and more

Wow, this was an exciting weekend.

Black Friday Sometime last week, I gave a friend some advice. “I think Bitcoin will rise 10% over the next 12 hours”, I said. I’ve been pretty good at predicting some of the recent price increases, so I got cocky and started thinking I’m actually smarter than the market. Then came the first Bitcoin Black Friday,  as value crashed down about 60% from a high of about $32 to a low of $11. In two days. Since then it bounced back to $20. I’m never giving short term financial “advice” or opinion again. In my defense, I did say Bitcoin is a long term investment, not something to use for short term gains, but I forgot just how much the market is still volatile. A good strategy for overcoming this volatility when buying or selling is splitting the action into a few days instead of buying/selling all at once. If for example you want to buy $1000 worth of Bitcoin, you should divide your purchase into a few smaller purchases. The downside is you’ll miss out if Bitcoin starts rallying up really fast, but you’ll incur much less volatility if you spread your purchases.

Bitcoin is not anonymous One interesting thing I discovered is that Bitcoin are really not anonymous, not under the current design at least. I summarized the arguments on this thread – basically, using some not too sophisticated analysis, you can guess out how much money belongs to each user you ever traded with. Not accurately, and it can be defended against, so I’m not worried, but it’s something that anyone with a few BTCs should be familiar with.

Diversifying into Namecoin Namecoin is a Bitcoin-based project designed to create a distributed name registrar (Bitcoin to Paypal like Namecoin to GoDaddy). Just for the heck of it, I’ve decided to diversify and purchase a small amount of Namecoin. It’s funny investing in an alpha stage startup project that’s based on a beta stage currency (or rather a POC that’s based on an alpha), but I’m curious enough to try it out.

MtGox just put 432,000 Bitcoin into a single address A lot of money is being moved. There are a lot of people false rumours like “Mt. Gox was raided by the Japanese authorities” and “shots fired at Mt. Gox, Bitcoin seized“. Some people have a huge investment and are trying to play with the market, play with people’s fears and make a quick buck.

A serious contender to Mt. Gox There’s a new exchange on the block. TradeHill has a better UI, and looks like it will develop partnerships with regional BTC sellers. I don’t know the exact volumes, but word on the street is that people are moving from Mt. Gox to TradeHill. The exchange is about a week or two old, and already is 3rd in term of volume (check out Bitcoin Charts). Nice work, we do need some competition to Mt. Gox, and having only one large exchange is risky.

A way to speed up your bitcoin client! I almost forgot, but here’s a way to add your Bitcoin client’s initialization. When it starts, bitcoin doesn’t know of any peers in the p2p network, so it hops into an IRC channel, announces itself periodically, and listens for other announcements. This can take some time. If you want to speed it up, simply add some fixed fallback nodes to your bitcoin command line. Yes, obviously this should move into the standard client, and it should cache known peers. We know the current client kind of sucks. This is the price we pay when the public’s interest in a project out-paces its development … the client will catch up.

The Faucet is empty Not too long ago, you could get 0.02 BTC for free from the Faucet. Well, since the rise on Bitcoin value, this is now equal to about 40 cents, and the Faucet’s pool was drained out. The solution is of course to lower the payout to something like 0.0001 BTC, but the problem is the client currently doesn’t allow transfer of amounts smaller than 0.01 BTC. This will be fixed in the upcoming version.


And last, but not least – I just read about Bitcoin in an Israel “dead wood” newspaper – Economy (כלכלה) by Maariv.