ForexMinute.com – Almost two-weeks earlier, we saw how a US-based Bitcoin mining company, dubbed as Butterfly Labs, was shut down by FTC. Reportedly, Butterfly Labs sent outdated and worthless mining computers to its customers, which could not even fulfill the very task they were intended to perform in the first place, i.e. mining cryptocurrencies.
This incident informed us about the presence of scammers inside the growing Bitcoin market, who capitalize on the public’s excitement and interest towards Bitcoin. But according to one of the Reddit users, code named Yung Rush, these scamming companies do more than just sending faulty mining machines.
The Reddit user presents a very effective theory that displays the active involvement of fraudulent Bitcoin companies in manipulating the market. “What happens is the hardware mining companies know exactly when & where the Network difficulty will spike,” he argues. “So while their customers are waiting, they used the hardware their customers bought to mine BTC right before the difficulty spikes. This happened in late September.”
This analogy comes in response to the recent crash in the Bitcoin market, where the coin’s value plummeted by 30% within the span of a few days. Presenting a pic below, uploaded originally by another Reddit user crypto_coiner, to prove the theory further.
As you can notice, the hash rate went up almost rapidly, as shown in the 1st block, indicating high mining operations during that phase. This period is assumed to be before the hardware is delivered to end-customers, which means that the companies are simply using the pre-ordered machines to mine their own blocks of cryptocurrency, which they dump under the market value. They subsequently go home with profits in both of their hands.
The ultimate impact comes on the customer who receives an outdated machine, failing to comply with the mining difficulty raised by the very same companies which delivered them the mining machines. It thus creates demand for more advanced mining machines, thus profiting these companies further. On the other hand, the ethical miners find it difficult to make enough investments out of their expensive deals, following which they short the cryptocurrency right after they mine it. It subsequently increases the supply rate against the demand, impacting imbalances in the market.
“Just today there was a massive Hash Rate influx. My speculation is the Mining Hardware companies are now dominating the network in attempt to find the last remaining block rewards before the difficulty spikes,” Yun Rush writes.
This is indeed intelligent analysis and requires extensive discussion. We would like to invite the appointed representatives of Bitcoin manufacturing companies to present their views on this matter. As the discussion matures, we would also like you all – the dedicated Bitcoiners – to show your perspective on this matter.
To contact the reporter of the story: Yashu Gola at firstname.lastname@example.org
Link to the original post: http://www.reddit.com/r/CryptoCurrency/comments/2ifc46/this_is_the_real_reason_bitcoin_cryptocurrency/