Bitcoin Forum

So the first wave of hyper inflation may have been when Cyprus banks got looted and then everyone that wanted BitCoin had to wait 3 days for wire transfer to clear. Soon as that happened all the new people bought up BitCoins at current price and skyrocket the value.

Now we might get a second wave of hyper inflation? Imagine, seeing BitCoin rise from $40 to $147 over night (due to Cyprus). Now a 2nd group of people want in on the action. BitCoin value seems to have settled around the $131-$141 for last 2 days, and just today the value has skyrocketed up to $154 high value! I think we're going to see a 2nd wave of hyper inflation, and its happening RIGHT NOW!

I was waiting for prices to come back down in the low $140's so I could buy in a again to make a 1-2% profit, but might have to bite the bullet on the new $152-$154 current price, and ride the wave up to $200-$300 per coin.

What are you all doing? Waiting or jumping in on the bandwagon?

I would expect the growth trend to keep going for a while. This is by my guessing a strongly viral growth but with a long incubation period (almost 1 week from infected to contagious).

What it takes for the viral coefficient to drop below 1 is beyond predictable. We can guess it will require a significant volume of individuals starting to cash out at a loss. But when?

Hi there,

isn't that what you would call a hyper-deflation? The value of BTC is increasing so all BTC prices are going down. Well might be just the opposite perspective but our fiat currencies are considered to be inflating, so BTC is clearly deflating from this point of view.

What he said, it's price deflation when prices drop.
Due to BTC mining there is always a monetary inflation of BTC untill all the bitcoins have been mined. If the coin value was stable this would also lead to price inflation, but the value of the BTC is rising so much faster then new coins are being mined that the monetary inflation is overshadowed by the price hyperdeflation.

Atleast that's what I get from it, I'm no economist.

I'm not an economist either, but I don't believe that BTC will see a steady rate of inflation like a traditional fiat currency. I think instead it will simply behave like gold did prior to the 70's where it retained a relatively stable value for over 300 years. The only times in history that the value of gold changed was following the discovery of the Americas (where it saw brief inflation) and then in the 70's when it became a commodity (for the first time ever, we were using gold to create stuff other than luxury items and coinage, such as computer chips.) Like other commodities, gold is now subject to periods of inflation and deflation. Right now gold is in a bubble in my opinion and is not worth diversifying into.

BTC will probably see wild variations in price until all blocks are mined AND anybody who is interested in BTC will already have a stake in it, even if a very small one. Keep in mind that not everybody will want or even be able to obtain a stake in BTC due to the barriers for doing so (e.g. needing a computer with access to the internet when exchanges are needed). At that point, BTC won't be a good idea for investment, rather it will simply become a medium of exchange. Good investments yield dividends or interest.

I think the price will keep groing a bit every week, BTC is just having it's tim finally. But I'd guess there will be huge inital drop when the few batches of ASICs from both AVALON and BFL will hit the public after mid of this month. So I jumped to LTC just for now because I can't really predict where the price will fall with the ASICs.

But maybe it'll be some good opportunity to throw some $ in when BTC will go down and than sell for high again and make small fortune? :D

Why would ASIC cause the price to fall?

136 years from now?  Really?  We have to wait that long before the exchange rate stabilizes?

Like some previous posters before me, I'd call this deflation instead. Prices (in BTC) have been dropping.

I don't know when it will come but the likely jump to at least $250 is coming soon(ish).

I'm still having a hard time believing the massive price increase.  But I'm not complaining since i built a gaming PC and have long since been a console gamer(due to lack of quality PC only titles).  So this is allowing me some decent ROI

$1,000 by the end of 2013

$100,000 by the end of 2014

 ;D

Much more money than usually will "appear". It is classical example of inflation, isn't it. Some people who will gain way too many bitcoins (because of they will initally mine way more) will sell. But as I said, if the demand will continue - and it will, european socialist thiefes are sending the whole Europe to shit (not that situation in US is that much better) making more people go to more safe currencies - it will rise back eventually.
Why not? FED is printing the green papers like never did before. USD has lower value every day. Euro will come to shit soon as well, socialists are breaking the rules and ECB will start priting euros soon as well. They will probably rob ppl of their money as they did in Croatia first before they will start printing it heavily, but they will eventually, it's all just a matter of time.

That's not how Bitcoin works.  Increasing the hashing power on the network does not significantly increase the amount of bitcoins that "appear". It only affects who gets the bitcoins that were already going to "appear".  Every 2016 blocks the protocol automatically adjusts the target difficulty to attempt to keep the total number of blocks found by the entire network around 144 blocks per day.

Lets take a look at some numbers:

The next difficulty change is due to occur at block 231840
At that time there will be 11,046,000 bitcoins in existence

If no new hashing power comes online for 2 weeks after that, there should be 2016 blocks solved and a total of 50,400 bitcoins will "appear".
This is an increase of 0.4563%

If enough ASIC instantaneously come online to double the entire network hashing power the exact moment after the 231804'th block is solved, then the difficulty won't have adjusted enough and the next 2016 blocks will occur twice as fast as normal.  At the end of one week 2016 will have been solved, and the protocol would then double the difficulty.  Therefore during the remaining week 1008 blocks would be solved for a total of 3024 blocks and a total of 75,600 bitcoins will "appear".
This is an increase of 0.6844%

At that time, due to the increase in difficulty, the network would return to 2016 blocks per week.
In this highly unlikely scenario of a complete instantaneous doubling of the entire network hashing power in a precise single moment immediately after the next difficulty change, there is only an extra 25,200 bitcoins that have come early.  Only a 0.2271% increase over the expected supply of 11,096,400.

It is far more likely that ASIC will come online spread out over several weeks giving the protocol time to keep up with the increase in hashing power by continuously adjusting the difficulty target.  As a result the number of extra bitcoins is likely to be significantly less than 25,200 resulting in a significantly smaller than 0.2271% increase in supply.

Furthermore, the community knows that ASIC are coming online, and understands that this is likely to lead to a very slight short-term increase in supply. As such, any price that the market settles on likely already takes into consideration this likelihood, and the increase in supply shouldn't have a significant effect on the exchange rate.

i sure hope it keeps rising considering I have real money invested in this currency. Some people think it will keep rising, others think it will definitely crash soon.

Bitcoin is a highly speculative and extremely risky investment.  It is not wise to invest money that would be financially devastating to lose.

I wouldn't be surprised to see $10,000 per bitcoin within 5 years.

I also wouldn't be surprised to see $0.01 per bitcoin (or even 1,000 bitcoin per $0.01) within 5 years.

I would be surprised to see the latter.

Yeah we agree, it won't have a steady rate of inflation like traditional currency. I was explaining what I understood of inflation/deflation. More bitcoins being created means monetary inflation, because that's the definition of monetary inflation afaik.

Then you don't understand how experimental, bleeding edge, and risky the future of bitcoin is.

In case somebody hasn't realized it yet, the OP is using the term "hyper-inflation" incorrectly. "Inflation" is either rising prices of goods or an increasing money supply, depending on the context. "Hyper-inflation" is an extreme case of inflation, and generally occurs when people spend money as soon as they get it because its value is dropping so quickly.

The OP is referring to the dramatic rise in price of BTC, which is none of those.

I think you are right, but just not timing wise. I'd say that within the next coming weeks we will hit those prices [1,000/BTC, 100,000BTC] as everything begins to destabilize and more scandals and shenanigans begin to pour out like made from the financial/bankster system. BTC right now is challenging the USD head on and EVERYTHING is being done (don't need to guess by who) to stop it and fight it. Yes, as the post above stated, this is inflation finally leaking through BTC and will of course leak through even more fervently going forward, which will lead to hyper inflation. Just like today the news of Portugal and Italy hit the waves which has sent ripples through the global economy, [hence todays price spike]. With BTC continuing this trend, gold and silver WILL eventually break from the manipulation and skyrocket as well.

(Grabs a nice white tea and book) Going to sit back and enjoy the show as things are about to get really interesting.

Interesting. I think I agree that this isn't "hyper-inflation" but rather "hyper-deflation" which is very interesting. Has the USD or other currencies gone through periods of hyper-deflation? What typically happens to that currency after that?

The reason I believe it is not inflation, is because inflation means the value of the currency is losing it's buying power, but BTC is gaining buying power right now.

So, is this a "bubble" then? Similar to the stock exchange crashes? My current opinion is that it seems like it will continue to hold strong and increase. But, if it DOES start sliding, I think there's a potential for it to tank hard.

Well it's my opinion after all. I still think you are missing some - the ASICs will icnrease net hashing power maybe even more than 100times (well, if BFL will ever ship their 20000 chips). Thats just way too much to be only minor increase for a while, it's so huge icnrease that many more coins will appear. Remember that most of existing bitcoins are just being stored in wallets, some of them maybe even forget. And I don't think really everybody in there knows about ASICs (that they will come and change the game, and when it happenes).

I've been reading these threads and I really don't know what to think.

On the one hand, BitCoin seems like it has a lot of momentum. There's a lot of invested value, and that's all money really is -- perceived value. If you think it's worth something, then it is. If you're willing to trade something for it, then it's worth that. People have put a lot of other currencies into this, so I have some faith that it will maintain.

But, then the question is, what's the point? Let's say I'm willing to build a website for you for 20 BTC. I've seen this argument around, but how do I then use that BTC to pay my rent, electric bill, and groceries. I'd have to cash out. If that's the case, why not just bill with the local currency anyways? (If this has been hashed out with a reasonable answer in other or blogs, share a link and I'll be sure to read.)

Cause Bitcoin is independent from any banks. Just look up what happened in Cyprus. People got their money in the bank seized by the government und just taken away because their bankers/government fucked up.

1931-33

After that, Big Gov intervenes and gets Big Bank to print $$$. MGM propaganda film promotes inflation (http://www.youtube.com/watch?v=JUvm9UgJBtg) as a great savior.

One thing that the stock markets have is an option called a "short" which is essentially an investment in the idea that the market will drop. It's a pressure gasket that prevents an all-out crash of the kind seen in 1929, but it doesn't prevent them altogether. I think the exchanges would be wise to develop a "short" option to keep the economics more stable and regularize the market.

I'm also seeing a lot of hype in the financial sectors about bitcoins, which are being seen as something of a futures investment for currency exchange investors. In addition, I'm seeing bitcoins on eBay for twice their market value at basically any of the exchanges. People are being stupid and paying anything they can to "buy in" to the investment, the same way they did in the 90's with tech stocks.

In the 90's it took about 4 years for the bubble to burst. Using an approximation of Moore's Law, this bubble should burst by the end of 2013, or at least stabilize somewhat. I doubt highly that it will even hit the USD$10 000 mark, but I've been wrong before.... I think that the investors will continue to buy until it creates an unstable mass, and then a rapid sell-off will create a drop. So long as one uBitcoin (micro-bitcoin) remains in the range of under USD$10 or so, there's no real danger of the currency destabilizing that much.

What goes up must come down... but in the investment world, what goes down must also come up. The problem is that people aren't really aware of what they're buying into, they're just reacting to the hype of what someone else told them. I've been watching for a year and am finally getting in... but that doesn't mean I'm all-in with everything I own. It means I'm buying a reasonable investment and sitting on it until I see the level I think it will top out at. At that point, I'll sell.

Done. Out. Hasta.

Well, until I get that awesome mining rig shipped to me sometime in May or later (if it's before October, I'll be ecstatic).

Imagine I'm in Europe and you are in the U.S.

Let's say I'm willing to build a website for you for 2000 USD. I've seen this argument around, but how do I then use those USD to pay my rent, electric bill, and groceries. I'd have to cash out to EUR. If that's the case, why not just bill with my local EUR currency anyways? (If this has been hashed out with a reasonable answer in other or blogs, share a link and I'll be sure to read.)

Bitcoin is a currency.  People will accept a payment in whatever currency makes sense for the transaction they are making and will then exchange that currency for their local currency as needed.  If you need/want the work, and the employer wants to pay in BTC, then you accept bitcoin.

Merchants and service providers have a financial incentive to accept bitcoin as a form of payment.  There is already a housing management company in Tennessee that accepts rent payments in bitcoin.  So for people who live in apartments managed by that company, that answers your question about how to use those BTC to pay rent.  Bitcoin is still in its infancy, it will take some time for people to adopt it.  You can get started earning/acquiring bitcoin now and be ahead of the curve, or you can wait to see how it all plays out and get started earning/acquiring bitcoin after all your local merchants and service providers (rent, groceries, electricity, etc) start accepting it.  That choice is up to you.

alexh, nobbynobbynoob, VishwaJay, DannyHamilton thanks guys. Good insight.

Danny makes a good point about why ***I*** should accept BitCoin. It would expand my market to build a website for someone who might have bitcoin, but isn't setup with USD or Paypal or a Credit Card. (The three easy things I currently accept.)

I think that logic should carry over to other things, but my mind is being slow to accept that. Hah, thanks guys for the thoughts.

As a currency there is certainly an incentive to expand your market.  As a payment vehicle, there is even more incentive for you to accept bitcoin.

What sort of fees to you pay to accepts credit card and paypal?  How do you receive USD when it is not paid with paypal or credit card?  Do you ever have any concern about chargebacks with paypal and credit card?  How long does it take from time of payment until the payment is cleared at your bank and you can spend it on rent, groceries, gasoline, etc? What sort of contracts are you bound into to accept paypal and credit card?

Bitcoin is generally better than traditional forms of electronic payment regarding most all those questions.

this is what i am seeing this (or at least the potential direction of BTC). It will gain some sort real physical value by being back with gold or silver. far-fetched? maybe. but currency is what is backed by faith and something physical. the USD is only floating on faith (in the view of the public) but behind the scenes every business/country(that know better) jumping off the sinking US-tanic is swimming away towards some physical shore (assets). just a matter of time. paper currencies only last about a good 70 years or so, and ours (USD) has lasted for around 100 (which ironically this year marks the anniversiry of the FED creation) years only due to being backed by the biggest and baddest mega police and the petro-oil backed paper. 2013 will be marked as the year the paper currencies fall and new ones rise. just my two bit-cents :^)

Real Money...

You mean US dollars I'm guessing.

I find it funny that you differentiate between "real money" (USD) and the bitcoin...

Does anyone else see the humour here?

No humor, just ignorance. People that use the term "real money" to mean some form of fiat money make me sad.

You are right. Context is everything. OP is definitely wrong in his use of the word inflation. Proper usage of inflation refers to monetary inflation - more specifically; the increase of the money supply. With modern fiat currencies controlled by central banks, this is easily accomplished by simply "printing money". The result of inflation is an increase in the price (the money cost) of goods and services and the decrease in the price of money (you will be required to supply fewer real goods and services to "buy" a dollar - i.e. the dollar buys less). This is because more money is chasing fewer goods. If you magically doubled the amount of money in circulation (with everyone instantly having twice what they had just a moment ago), very quickly you would see prices for everything basically double. No new wealth is created. All that happened was a massive trauma to the economy as everybody scrambles to adjust to the sudden halving of the value of the dollar.

In reality, central banks inflate much more slowly, but it is not a natural (or even desired) phenomenon. Let's say it's 2-3 percent per year for decades on end (as it basically has been). People get used to it and plan their lives around that rate. However, if the rate changes (specifically, increases) over time, then it's harder to plan for the future. People are more likely to spend now rather than save for spending later simply because their saved money will be worth less (and unpredictably so) in the future. This has numerous consequences. One of them is society's capital stock starts to dissipate (gets eaten away by present consumption). We become a consumerist society with less and less investment in the future. Eventually, we collapse as we have no more capital for long term projects.

Hyper-inflation is the doubling of the money supply on a yearly, monthly or even weekly basis. Imagine prices of groceries doubling every week (or worse). In Germany in 1923 wives would wait outside their husbands' places of employment on pay day. As soon as the paychecks were handed out, the wives would take them and run to the bank, get cash and then run to the market to buy food because it would be significantly more expensive the next day. In a hyper-inflationary economy, people spend money quickly (i.e. don't want to hold cash) because prices are rising. Not the other way around. Spending doesn't cause hyper-inflation. The government printing press causes hyper-inflation. And hyper-inflation causes rapidly rising prices of goods and services.

As for Bitcoin, it can never hyper-inflate because of the very nature of its mining process. While it will continue to technically "inflate" (increase in supply), that inflation is slow (and slowing), well understood, and ultimately limited. This allows for the possibility of rational assessment of its value, and will not (in and of itself) incite people into panic buying or selling. The value of Bitcoin must properly be measured by what goods and services it can buy (and has bought historically) over a wide range of products. Unfortunately we don't have a lot of historical data on what people are buying with Bitcoin (so we don't know its true value). Until we do, and as long as we are measuring Bitcoin against the dollar (a currency that itself is susceptible to state tampering and hyperinflation), we will see wild fluctuations in Bitcoin's "value". But such rises and falls do not constitute deflation or inflation. Such rises and falls are just speculation birthing pains associated with an unknown, unproven commodity.

Yes, Bitcoin is a commodity. Just like gold. So is all money. But not all money is created equal. The demand (and thus the value of any money) is based on its usefulness as a relatively stable lubricant for commerce (and its value can change over time just like any other commodity). The transparent, effortless ability to convert any good or service into any other good or service (even across spans of time - think futures contract) is what makes a money good. Money is barter butter. Good money allows barter of anything to anything across time and space with little or no loss of economic energy (low "economic friction"). Good money does not inflate much (the less the better). Zero inflation is best (as Bitcoin will eventually be). Good money is infinitely divisible, easily transportable, relatively rare, non-perishable, and accepted almost everywhere. Gold fulfilled all of these requirements. Bitcoin isn't quite there yet (it's lacking in the transportability and acceptance categories). The other area of challenge for Bitcoin is the so-called legal tender laws. If governments feel threatened by Bitcoin, they will fight it. This may be a big roadblock in the future.

Gold enabled the industrial age to flourish world-wide. It was eventually "stolen" from us and replaced with government paper. Read Murray Rothbard's "What has Government Done to Our Money" for a description of how we lost the use of gold. Also, read Leonard Read's "I, pencil" to understand the global economy. Now, Bitcoin threatens to become the new digital gold. We just need some entrepreneurs to come up with ways to make Bitcoin very transportable and the acceptance will (hopefully) follow. To paraphrase Jeff Goldblum in Jurassic Park, "The free market finds a way".