[Groxx]

>millions of USD sunk into Bitcoins lost big in the flash crash.

Seriously? Check MtGox more closely. Even down at ~$10 where it is now, only the extremely-new users who bought it at skyrocketing prices got screwed. And by "extremely-new" I mean extremely. The prices are still above where they were less than a week ago.

What we just saw was the bursting of the first large Bitcoin bubble, not the first depression. Depression for the people who bought during such a freakish rise, yes, but there will always be winners and losers in any economic game.

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edit: On a side note, I've found Paypal's "excuse" for not allowing transactions with Bitcoin merchants a weak one at best. Why, then, have they allowed exchanges with Linden merchants like VirWoX for the past three and a half years?

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edit2: wow, this article gets worse and worse:

>Mt. Gox is the world's largest bitcoin exchange, but it's suffered from major liquidity issues in recent weeks. The recent massive inflationary drop is also a sign of poor controls at the exchange.

Two questions: 1) why did Mt. Gox suffer? They're a trade tool, all the action has only been good for them, to the tune of 0.65% of each trade! 2) they're an exchange. If they wish to exchange at market price, what "controls" would you expect them to put in place? People pay what they want to pay, that's the way MtGox has always worked, they're just an intermediary.

[netcan]

It does undermine it as a useful currency though. Can't set prices in bitcoin, can't safely hold money in bitcoin, can't safely sign future contracts in bitcoin.

I'm not sure how much of that was going on in the first place, but isn't it the goal?

[Groxx]

It's volatile, just like any similarly-tiny market. You can't set prices in moon rocks, because a single round-trip to the moon would destabilize the entire economy.

But you could if trips to the moon were a daily occurrence, and the flow of moon rocks were relatively steady. Or compare buying stock from startups vs the Fortune 500. Bitcoin is too small to be reliable now, but the bigger it gets, the more resilient against such booms and busts it becomes. It's pretty well established that it's not a stable market right now, but that's obvious and it doesn't mean it won't become so.

[joezydeco]

I think the OP was referring to the Dwolla API issues that MtGox was having. With Dwolla being their paypal-alternative, people got kind of spooked when suddenly they couldn't move money in and out of the market earlier this week and no answers were immediately available.

For what it's worth, MtGox claimed Dwolla switched their API around for their "Grid" product without any forewarning (big round of applause for oAuth, everyone!), and got the API issues fixed a couple of days ago. They've been more upfront and communicative ever since.

[Groxx]

That could very well be the case, thanks! I was hunting around for possible causes, but wasn't having much luck.

[bastiat]

but there will always be winners and losers in any economic game

I believe you mean to say 'financial' here, in place of economic.

[Groxx]

I suppose, yeah. I was thinking that you're essentially betting on the Bitcoin economy if you buy them.

[bastiat]

It's worth recognizing that buying USD is also a bet highly correlated to the United States economy.

Regardless, I disagree with the veracity of using either term in that sentence but, apart from people like myself, you'll find much more solidarity in denigrating "finance" over "economics."