Bitcoin Forum

Why are people so worried about people "hoarding" bitcoins?

Is it because you think that there will be no more bitcoins left to spend?

Is it because you think we should all be spending all of our money?

Is it the 1% thing?

Do you think it is a huge conspiracy to later crash the price and destroy Bitcoin?


There are almost 11 million bitcoins out there. Even if there were only 100 bitcoins (less than created in the last hour), those 100 bitcoins could be used to run a small economy with the fact that each bitcoin is 100,000,000 satoshi. And if you are so worried about that, gather up at least 100 bitcoins for that purpose.

If you are worried about us not spending bitcoins, the more money that goes into the bitcoin economy, the larger the bitcoin market will be and the more incentive for someone to tap that huge market. How many technology pitches start with "X is a billion dollar a year industry...". Look at the video game market, millions are spent to get kids to come off of a few bucks to buy some game or another. Competing companies vying for the larger piece of the pie. People will spend their bitcoin. And if it turns us all into savers instead of spenders, then all the better. How much is consumer debt these days?

The 1% thing? Are you worried that only a few people will have control over the whole Bitcoin economy and be able to control things like the huge corporations and banks do now? The best way to prevent that is to start hoarding yourself and get as many other people to hoard as well.

Or is it all about crashing Bitcoin? The old pump and dump argument. Is everyone working together on this? Because I never got the memo. Bitcoin has hardly scratched the surface of adoption. If someone wants to dump their bitcoin, there are tons of people in line to buy at cheaper prices daily. Let them dump into our waiting wallets.

All I know is that monopoly is bad.

Maybe we arent hoarding bitcoins, but rather getting out of USD

good luck hoarding now unless your a 1%'er

early adopters a while ago are the true ones that benefited, heres the thing about hyperinflation

the only people negatively effected are the ones who got in late and cant buy for cheaper, anyone else who got in earlier could give a crap less about hyperinflation

the rich just get richer

I've had USD in my bank account ever since I opened it.  I must be hoarding it, since I am not spending it at whim.

or convert it to bitcoin and join us other hoarders :)

This is so funny and sad at the same time. In recent months BTC has seemingly lost its true utility -- a currency -- and has become a speculative asset that provides no utility because if you use it, you'll potentially be leaving money on the table. Amazing :o Everyone start paying with Paypal and Dwolla again :D

only sad if you were a bear 6 months ago and had the opportunity to buy in with a big amount

we need more bitcoin merchants though. in time, there will be less hoarding or a combination of both.
I hoard for the time being because I see no real way to spend them. But I do believe that in the future I will, so when that day comes that I want a new vehicle, I can walk into the dealership and make my BTC transfer and be done. Until then, i buy and hold

Is this based upon opinion or do you have facts to back up that claim?

http://blockchain.info/charts/n-transactions-excluding-popular

http://bitcoinmagazine.com/bitpay-processes-5-million-in-march-eclipses-silk-road/

I have not used bitcoins as a currency until recent months.

Does Bob exchanging his BTC for USD count as a transaction?

For now, it's likely to stay as a store of wealth.  Once I can make a living earning BTC, and have a steady income of BTC that isn't a pain in the ass to translate from my USD, I'll be much more inclined to spend BTC.  Since I plan on turning all my fiat into BTC, whatever I've yet to use, will go to paying off my various debts--makes more sense than getting into BTC, going back to USD, and then paying my debts that way, at least until most merchants accept it.

Or you can just order a vehicle online if you are not in the Kansas area:

http://www.overlandparkjeepdodge.net/index.htm

did i miss something? do they take BTC?  if so thats awesome and i live under a rock lol

Yep, they take BTC via BitPay.

wow thats great to here. thanks

Might want to not buy that vehicle just yet, might be paying $2.5 million for it if you believe the hype around here.

So it appears that the impression is that hoarders are hurting Bitcoin because we are not using it as its intended purpose, as a currency.

I imagine that such an idea must be from people new to Bitcoin because we have come a long long way since only being able to use bitcoins as a currency to buy pizza or alpaca socks.

My wife's clothing store was one of BitPay's first merchants, there were 3 of us on their merchant page. Now there are over 50,000 and growing.

Do you honestly think that people are not speculating with bitcoins? Bitpay does 5 million in a month.  Mtgox does 10 million in a day.

Miners create 3600 new bitcoins per day.  That's currently more than $500k per day.  Where does this money come from?

the answer is mbtc ! millibitcoin. if the community would start talking about mbtc, the outside world would adopt it sooner or later: what happened with the btc will sure work the same on mbtc level. mbtc is a project we all need to be getting enganged in. btc is getting to expensive, let´s switch to mbtc and everything smoothens out. this will be fun.  

just because a coin is minted doesnt mean it gets sold.

What's wrong with keeping the stored information of the value of my labor?

Why should I consume just for the sake of consumption?

Isn't consumption mania one of the problems of society today?

I use bitcoins wherever I can and whenever I really want something, or for donations. I convert most of my fiat to bitcoin anyway, so it doesn't make much difference to me what I actually spend.

I'm not hoarding, I'm saving.

Seriously if you don't want your BTC anymore just send it my way if you're unhappy with BTC. ;D

So, miners are speculating as well?   

Unfortunately, miners costs still have to be paid in currencies other that bitcoin, and market will push the cost of each bitcoin mined to be close to one bitcoin.  Right now, the difficulty did not have the time to adjust due to fast price rise and ASIC scams, but that is not a permanent situation. 

Around 0.3 to 0.5 million dollars of fresh speculative money will be needed each day to keep the price this high.  And this is needed even if speculators do not sell at all.  When they do start taking profits, this will just add to the outflows.

Anyone can "take profits" by buying something with their Bitcoin (a new ASIC miner perhaps?).

I take profits every month by spending less on my hosting service (paid in bitcoins) than the previous month.

I am moving from hoarding dollars to holding a currency of value.

I hoard because I see no useful (for me) way of spending the bitcoins.  But if people are hoarding then I as a business owner don't see much utility in supporting bitcoins as people are reluctant to part with them.  Chicken and egg.

Right now we have a problem.  Bitcoin's price is rising so fast, so high that you would be silly to spend any of them on goods and services.  Yes, downright stupid.  $15 in January, $60 in March, $160 in April.  At this pace we're looking at well over a thousand dollars before the end of 2013.  Parting with any bitcoins now is leaving a huge wad of money at the table and literally walking away.

One can look at the trade volume on MtGox as evidence that people are spending, but it must also be considered that people are rather speculating and trading.  One side wants to get out before a probable bubble pops, the other side wants to buy as many as possible and dump before the bubble pops.

So, no attempt at answering the question of who is paying $0.5 million per day so that your currency of value can hold value?

What currency should we spend on goods and services then?


Follow up:
Why would anyone be silly enough to have dollars to spend right now?

When Google was paying their CEOs in the early days with stock options, were they bringing in the amount of money per day to pay for those stock options in order to hold value?

The inflation created by mining is already priced in.

That's a funny way of saying "98% of trades at MtGox are speculation".

the bitcoin economy itself, the price is going up right now because the demand is insanely high and the half million is not nearly enough to cover the demand hence why people are paying the current price.

even though some are not spending there are many who are, whether its because they need money right now or just want to cash out is at the discretion of the holder themselves but there are people who regardless of how much they spend it not really matter because in the end  its going to be a lot anyway,

there is just an insane amount of demand right now so much so that wealthy people are trading their cars and toys to get bitcoins because its difficult to get them in big numbers through exchanges and such, your lucky if you have bitcoins and i guess if you have only a small number hold but all the small numbers in the economy do not account for the bigger players,

Well, i can't get red of them cause then i'd beat myself when the prices go up.

The inflation is not priced in.   It would be priced in if all the minig costs were in BTC.  They are not, electricity costs you must pay in a local currency.

There is a reason that they get stock options, and not actual stocks that they could sell on the exchange right away.  The reason being that in the early days those quite large amounts of stock would push the price down.

Miners are not paid in BTC options, they are paid in BTC.  It is not only that they can sell them right away,  they must do so to cover the running costs.  Otherwise it is them that are bringing in the fresh money.

So, any other answer attempts on who must pay a large chunk of those $0.5 million daily?

The miners' parents obviously.

Saying that $.5 million is paid per day follows the same mistake that people who think we actually have over $1.5 billion worth of bitcoins make.

The money traded on the exchange is what determines cost. Out of almost 11 million bitcoins in existence, around 75,000 are traded daily or about .6% of all bitcoins determine the price.

Trying to say that the 3600 bitcoins created daily is part of that 75000 as opposed to that 10+ million is misleading.

Taking the trend of the Bitcoin economy as a whole, only about $3,500 of mined bitcoins need to be sucked up by buyers each day to simply maintain the current price.

As for miners needing to pay their own bills. Most people who hold bitcoins need to pay their bills. Most people who hold bitcoins are paid in cash. Bills can easily be paid without going through the extra steps of converting bitcoins to do so.

Less consumption is less polution.
We're saving the enviroment while getting rich. We also have to work less for our money, so I don't see the problem.

I'm assuming you got that $3,500 by taking the same percentage of 3600 BTC, as that 0.6% of total BTC that is traded.

But this is clearly wrong.  Holding 10 million BTC does not create those running costs.  Mining does, and market forces will always work in the direction where the end result will be that a large part of that 3600 BTC gets sold to pay for running costs.

And this gets worse if the price rises.  If BTC get to $10.000, it becomes $20 or $30 million daily.  And the power usage gets to be counted in the number of nuclear power plants needed.

So, the only way that the BTC price is sustainable is that the amount that miners get is the same as the value that the bitcoin network as a whole creates.  Right now the largest payment processor has $5 million per month volume.  No way this comes even close to 0.5$ million per day in "value creation" needed for the price to be sustainable.

Do you truly believe that if all Bitcoin users were to go onto MtGox right now and sell all 11 million bitcoins, they would walk away with a combined $2 billion?  That is the only way your $.5 million per day thing works.

Is that the current ask total these days? $2 billion?

I plan on buying an ASIC. To do so I will need to convert dollars to bitcoins. I will purchase my ASIC and run the ASIC to get bitcoins. I will then use those bitcoins as currency or hold them. Any electricity costs I accumulate will be paid with dollars like any other utility bill (until they take bitcoins).
What part of that process requires me to cash out my bitcoins?

Miners' costs are not 11 million bitcoins, what are you talking about?

Nothing depends on the price bitcoin has if all attempt to cash out, why are you thinking that?

When miners cash out, it is at max 3600 per day.  That is your $0.5 million per day.  Nothing to do with 11 million cashing out.  And this $0.5 million clearly follows price, the higher the price, the higher this number is.



Your decision to pay the costs with cash is the same as if you invested into bitcoins with that cash.

For mining to not add selling pressure on the exchanges, the amount of money to pay for the electricity must be the same as the amount of fresh "sucker" money entering the exchanges.   In your case, you just moved your newly invested money into the "fresh money" category, you still need others to top up to that $0.5 million.

I spend some and I save some. I'm no economist, but don't we need to spend these things to enhance their utility/value?

Extremist Scenario: Most people hoard these things, consumers and merchants loose interest, and we are all holding the virtual equivalent of Beanie Babies. (http://en.wikipedia.org/wiki/Beanie_Baby#Collectibility)

I fear that some day I'm going to come across an unspent 25BTC Casacius coin for sale for $1 in a Thrift Store and think, "Man, those were heady days..."

If I've gained any knowledge these past few weeks, it's that there is a lot of stupid money out there. I'm just not willing to gamble when it'll dry up.

You saying that miners cashing out 3600 per day equals $.5 million per day. That would be the same as saying we are propping up Bitcoin by keeping $2 billion in the system. Has $2 billion been poured into buying bitcoins to reach this price?

If 100,000 miners have an extra $14 added to their electricity cost, it will not impact the bitcoin price. What will affect the price is when those 100,000 miners convert their dollars to bitcoins in order to buy an 88 BTC ASIC (which are paid for in BTC).

To say that they would have spent that $14 on MtGox instead of electricity is a stretch. That is like saying that federal income taxes are keeping the price of bitcoins down by $2 trillion per year because people are paying taxes instead of buying bitcoins.

They are being spent. Please point to the facts that would show that bitcoins are not being spent.

Speculation is not the only forum on this board. Go read through MarketPlace or Project Development.

3 months ago

The more distributed the transfer of wealth when switching to Bitcoin the faster it will grow, so no shame in being a bear.

The problem with hoarding is not as much the hoarding as the lack of spending. The value of bitcoin is ultimately determined by its utility. Its primary, if not only, utility is as a medium of exchange. If most people buy bitcoins to hoard them and not spend to them, then the price rises but the utility stays the same. This situation will ultimate lead to a crash, which could kill bitcoin's future. That is the problem with hoarding.

Take a look at the charts below. Though the indications are not completely clear, it appears to me that hoarding is not pervasive and not likely to cause a crash. People appear to be selling off their hoarded bitcoins and there is still plenty of demand.

The first chart shows that the number of transactions vs. the number of exchange trades is falling. This can be interpreted as saying that more people are hoarding than spending. That's bad news.

https://i.imgur.com/NRMgkC5.png?1

However, the second chart shows the amount of transactions in USD has increased tremendously, almost as much as the price. This indicates that hoarding is not as prevalent as some people think. That's good news.

https://i.imgur.com/06M6gHc.png?1

Finally, the last chart is complicated to explain. In simple terms, if you compare the graph to a graph of the total number of bitcoins, it indicates the level of hoarding. A high value compared to the total number of bitcoins indicates more spending and less hoarding. This chart shows that the percentage of hoarded coins is dropping, and very quickly in the last few weeks. That is great news.
 
https://i.imgur.com/wWclOjY.png?1

WHY ON EARTH DO PEOPLE KEEP SAYING THAT NOBODY IS SPENDING BITCOINS???????

It just keeps popping up... and I can't for the life of me figure out how we come to this conclusion.
Bitpay is getting a RECORD number of new merchants, and their sales figures are increasing at a record rate, so it's not just merchants signing up for an unused service... it doesn't even matter whether or not the merchant cashes out to USD; people are SPENDING BITCOINS. Sure, it sucks when you buy something with bitcoins when they're $24 and then at $150 you think of how much more money you could have... but what are you going to do, throw every single cent of FIAT at MT. GOX and live in a cardboard box on a hunger strike until bitcoin hits $1,000,000? DUDE, THAT'S SO TOTALLY NOT HOW IT WORKS. (Is anybody doing that? PLEASE tell me if you're doing that, so I can laugh at you, for being the one idiot that doesn't spend during deflationary opportunity)

Your theory is whack because it is based in a Paul Krugman wet dream fantasy world where people don't spend deflationary currencies since they will be worth more in the future. People are human, they have needs that must be fulfilled in the PRESENT MOMENT. When the need for something in the present moment surpasses any potential future benefit of putting off that need, the person will seek to meet the need in the present. Sure, I'll give you this: The faster the currency deflates, the saving:consumption ratio increases. But we're not at a point where nobody's spending bitcoins, because if that were the case, NOBODY WOULD BE SPENDING BITCOINS. By the way, the charts above say this a little better than my violent stream of arrogant language so I apologize. The problem you describe - we simply don't have this problem right now. When bitcoin starts going up 1000% a day then maybe people will start throwing every cent of fiat into bitcoin and living in cardboard boxes - then I'll concede to your superior logic :-P

People are spending bitcoins. So, Q.E.D. wipe Krugman's inflationary emission off your face and buy something with your bitcoins.  ;D ;D ;D

I think the point is I can quicker meet my needs paying with fiat than spending a BTC that will be worth 20% more tomorrow. I guess for some reason you're assuming it's necessity to spend BTC?

How is that the same,  I simply don't see your logic here.

Saying that somebody sells $0.5 million per day means that if nobody is willing to buy that amount at that price, the price will go down.  

At no point does the total "market cap" enter the picture.

The point is...why do you still have fiat?

Because I can spend it anywhere I want to, and chances are better it'll retain value over the long haul than BTC which is 4 years old and can be traumatized with the swipe of a pen from an overzealous legislature.

Regarding your debate with mestar. I think his point is, if someone sold 3600 BTC right now on MtGox, what would be the next highest bid after those 3600 coins were liquidated?

You claim that because X bitcoins are created, Y dollars need to be invested for those X bitcoins to stay in the system.

I am asking if 3000X bitcoins require 3000Y dollars to be invested for those 3000X bitcoins to stay in the system.


X being 3600 and Y being $.5 million.

3000X being ~11 million and 3000Y being $2 billion

If the exchange price doubles every month, and you spend half of the coin each month, then your consumption power will always stay the same, isn't that amazing ? ;D

I am not sure of the exact price as I cannot view all of the charts at work but I would guestimate that selling 3600 BTC right now on MtGox would bring the price down near $100/BTC.

Has there been any indication on MtGox that all miners are selling 3600 bitcoins per day?

Or are miners different from other users that would somehow imply that they are not like the rest of the Bitcoin community where only .6% trade on a daily basis.

If they don't sell it, they're investing in it (at cost), so it's still the same amount entering the market just via electrical expenditure instead of direct USD. Might not be exactly because there is a profit margin, but it's still new money. Just they are the new money.

Hmm, I am only able to see down to 167 on there, is there a setting to widen the chart?

Correct, and because it does not flow through MtGox, the price is not affected.

@Hmm, I am only able to see down to 167 on there, is there a setting to widen the chart?

The + - upper right above the chart

@Correct, and because it does not flow through MtGox, the price is not affected.

What's not flowing through MtGox?

Nice, thanks.

Newly mined bitcoins.

Well they're not flowing at all if they're being hoarded by miners. And if they're being sold it's immaterial what exchange they're sold on, it will still require $X/coin to maintain the current market value or the value will adjust downward due to inflation. Point is -- to maintain current market value with an inflation rate in existence, new money must flow in at around 3600 coins/day @ current market value. Somewhere in the bitcoin economy, this must happen. Whether from new adopters or miners.

Or being used as currency. Spent on bitcoin purchases for goods or services.

That's still an inflow of capital (labor/services), and it would have to be an inflow sufficiently high enough to maintain current market value.

So...it would be better for the Bitcoin economy if miners hoard their coins...in order to avoid this requirement for an inflow of capital. Correct?

No, because if they hoard it then their mining costs are the new inflow of capital.

Which could actually end up costing less than transaction fees at an exchange.

And at the current price, the cost of mining is miniscule compared to what you get in return. (currently a 64% profit margin, not including the rising price after you have mined).

That's fine. So then 36% * $168 * 3600 = new inflow required to maintain $168.

Which helps in spending because Bitcoin is inflationary. Which helps the Bitcoin economy because people will be more likely to spend their bitcoins because the value of a bitcoin keeps going down.

And according to Krugman that is good because more people will spend and that helps the economy.

So miners are not only helping to secure the network, they are stimulating the Bitcoin economy.

So much for anyone hoarding.

The point of this discussion has been that new inflows must come in at certain rates to maintain current value. No one is arguing where it comes from in particular. Also Bitcoin is deflationary by design, but for the time being there is a degree of inflation.

That is true, but I can only work with the data that is available. A better chart would be "Estimated Transaction Volume excluding 100 top sites in USD" but that chart is not available.

Looking at what that amount does in a day misses the point.  You have to think what happens when this amount hits the market every day for the next 3 years.

Most miners are in it for the profit.  Saying that their volume contribution the same as the total average is silly. 

As for the proof, look at this chart.  Volume never falls bellow double the 7200 daily that was then, but look at the price. 


https://i.imgur.com/gCZnkOb.png

Only if merchants themselves are hoarding.

Even though Bitcoin is rising sharply, it doesn't mean that you wouldn't want to use it as a currency. Think about it:

1) Who wouldn't want to receive bitcoins now if they were fine with them before?
2) Why would you prefer any other form of payment if you would have to pay someone?

Currently it's 'fresh money' pouring into Bitcoins that's paying for the power expense + miner's profits

This 'fresh money' is stupid because it doesn't understand that mining will bring back Bitcoin's unit price to its real value, zero. The price of bitcoins will trickle down at some point, to zero, not because it wants to, but because it has to.

I myself find this super entertaining to watch that some people are going to lose this rigged game bigtime.

Several people in this game, like Trace Mayer, are trying to put that inevitable loss to the current millionaires of the world by convincing them to buy bitcoins in the press. That's why I love that guy, he'll make our time with bitcoins worthwhile if he succeeds.

Almost everything you say is complete bollocks.

Currently the only known force which is guaranteed to bring the value of Bitcoin to zero is Entropy. And when that occurs nothing else will matter.

Your assumption is that the value of a bitcoin is pegged to the cost involved in mining it and making the false conclusion that when mining ends the value of bitcoin will return to zero. That is completely untrue because miners are only a single part of the puzzle.

By the time all coins have been mined, we hope Bitcoin will be as ubiquitous as Paypal or even Gold, and by that time we hope that millions and millions of people will be using Bitcoin to buy and sell services. That demand will not disappear when the last block is mined.

Pardon my ignorance, but even after the lost block is mined, do miners need to stick around to validate transactions? Or no?

Yes there needs to be a network of computers to validate transactions, and there will be fees to be made from that, whether that will be profitable I don't know, and how much hashing power will be required will depend on the number and size of those transactions.

Ok, figured as much. I wasn't sure if it was the avg BTC user that would contribute to this validation process since everyone has the blockchain, or if it had to be dedicated individuals.

The only thing worth spending Bitcoin on is getting more Bitcoin.
Invest it.

It's also probably a good idea to spend Bitcoin to protect Bitcoin.

Savings is only delayed consumption.

The problem is that wealth can not appear from nothing.

Those who bought bitcoins for $1 a year ago can buy a porsche or yacht today just because those who want to adopt bitcoins today pay for it. And those who buy bitcoins today think that they will be able to buy a porsche with yacht next year, because somebody else will pay for it. An this is not going to continue forever. At some point this scheme will leave many bitcoin supporters broken. And, you know, greedy fools deserve it. Bad thing is that until hoarders get punished, this wonderful technology stays pretty much unusable.

Well said.

What a load of shit.

He should probably clarify. It's ok to move in and out of rapidly for a transaction, but we will hold fiat because BTC is entirely too volatile. Better?

So more coins on the market somehow make it less volatile? This is what I don't want to happen. A bunch of noobs sloshing coins around in between bouts of fear and elation.

But that's what you have right now. You're making his point.

Hoarders will never get punished unless Bitcoin tanks significantly, which I sincerely doubt at this point unless there is a protocol failure.
Saving is hoarding is saving.

Furthermore, I, as a "hoarder", don't think I'll be able to buy a Porsche (even though I actually could right now), I just want to protect my money from Ben Bernanke and the organized theft of my savings. I've bought Bitcoin all the way up. It's a store of value just as much as it's a transactional currency. People seemingly forget this every moment of every day.

I see his point though, I read it wrong. It was that last sentence that threw me off, which is %100 incorrect.

What hasn't really been addressed in this thread though, is where all that new daily inflows will come from. The higher the price goes, the more pressure it will face.

Truth.
Hopefully there are more libertarians with deep pockets out there.  ;)

I know 5 individuals who buy BTC simply to purchase "stuff" from Silk Road.

They don't care how much a bitcoin costs...This is why trade is so important. and why bitcoin is so different. Unlike gold and almost every other kind of investment, you can actually spend your bitcoin directly so as long as that demand continues the price of bitcoin will continue to appreciate over the long term.

In the short term I think we are clearly in a bubble and there will be winners and losers as you say.

I wrote it based on my experience. When I learned about bitcoins several month ago, I got a couple of BTC to test the technology. Technology is a piece of cake, but since then I did not find any use for my btc yet, except wasting some mbtc in online casino.

If you think that bitcoin is good for storage of wealth your are 100% wrong for a reason I mentioned above.

Well, I meant moreso the inflows to pay for the 3600 new bitcoins minted per day at the current market value to maintain the current market value. Basically mestar's argument. I think he grew tired of the discussion hehe.

Hm, now that's interesting. You think it's 1 individual/entity?

Why? I can buy a house, car, any electronics device, anything on any website that Bitspend accepts, so pretty much anything besides groceries that can spoil.
At the moment I am gaining on my savings, whereas in any bank account in the US I would lose. Dollar averaging will make my savings fine all the way down to $20.

Agreed. I've seen some very sharp moves that indicated someone was dropping $250-$500k into the pot, I believe from $120 to $140. And I believe someone does keep prices stable before bidding up again. This kind of money can manipulate such immature markets, and is very scary.

Because it will crash as soon as newcomers will stop bringing their money into system. It will not stabilize, but crash. This system was not intended to be a pyramid, but it acts like a pyramid. Early adopters are going to get rich because late adopters are going to lose money.

Why would they lose? Only if they cash out lower, but they don't have to. The guys who "get rich" now didn't cash out at $2. That's how it works.

Deflation is a pyramid, honestly. The only difference being it benefits everyone with savings in that currency.

Which is only a problem when instead of hoarding these speculators turn into dumpers.   If the coins were mostly used in commerce for purchases, then there would be less volatility based on whatever the response is to the next news article on Bitcoin.     But when the (temporary) price top is reached and the exchange rate direction turns south -- those hoarders all stop hoarding and race to the exits.  Some will have made it out with plenty of gains, others roughly break-even, and the last ones who bought will see losses, sometimes heavy.

Now if the merchant can set prices in dollars and uses a payment processor who converts all bitcoin revenues to dollars at the spot rate at the time of sale (less the conversion fee), then the merchant can be pretty much agnostic about the exchange rate (though 10% swings in a day mean delays simply in waiting the hour for payment to confirm before the coins can be sold is something that will eat into profits)

But if the exchange rate is dropping and the hoarders start dumping, they will also be using their coins making spend purchases.

So bitcoin wins either way thanks to hoarding.   When the exchange rate is on the way up hoarding causes the exchange rate to rise which attracts others to buy bitcoins causing them to become familiar with buying bitcoins and using them in transactions.   When the exchange rate is headed down bitcoins get spent with merchants causing it to gain traction as a payment method.

Transaction fees = spending Bitcoins.

I really wish that people would stop talking about loosing money. I, for one, intend to tighten my money. If it gets loose I'll use some duct tape.

Bitcoin is unlikely to achieve a stable value in the foreseeable future, but that doesn't matter. Bitcoin is not destined to be used directly in ordinary commerce. Think about how HTTP is built on top of TCP/IP. In the same way, we will build new, stable currencies on top of bitcoin. They will be pegged to dollars, gold, oil, and anything else your heart desires.

I wrote a paper about this future, and if you come to the bitcoin conference in San Jose in May, you can hear me talk about it and ask questions at the "Bitcoin in the Future" panel.

The take-away is that buying bitcoins now is the best way to bet that these "child currencies" will be successful. They depend on bitcoin, and if they are successful, bitcoin values will go up.

Thanks for correction. English is not my first language, and this is were spell checker does not help.

With inflative fiat and ever degrading physical goods, there is no way to store value, bitcoin was created to fill this demand vacuum, not to compete with fiat currency in payment function, its price will always rise, indicating a good store of value

There is a false education in economy school saying that people saving now for future spending, but I've seen many rich families saving their wealth now to be transfered to generation after generation, especially those banking families

how does your approach compare to Ripple?

I think what he is describing is exactly what Ripple is....

Ie. Someone can have a ripple account backed by BTC, with the transactions happening in ripples and but ultimately guaranteed by bitcoins.

The beauty of that is we can be free to have a hundred different payment systems off the back of Bitcoin. And they can all be the best at what they do and we can fill lots of different niches in the best possible way.

Think of Bitcoin like the gold standard.