Bitcoin Forum

I'm trying to think of ways to have Bitcoin keep its value, instead of always fluctuating up and down.  As far as I know, it rises because lots of people buy coins, and once it hits a certain point, someone decides to sell a large amount, so the price drops a little bit, causing everyone else to sell, dropping the price lots.  It falls down, until it hits a low enough value that people wish to "buy back in", and then the price begins to rise again, and the cycle repeats.

My idea is that instead of waiting for the price to rise to sell coins, wait for the price to rise to buy something with coins.  Go to coingig, or bitcoinstore, and find an item that you want, and tell yourself "When Bitcoin hits 120$ (or any price), I'm going to buy this item instead of selling to an exchange.".

I think that this would help keep the price stable, as well as distribute the coins more, instead of keeping them all locked up in an exchange.

EDIT::  My knowledge of economics is minimal, so I could be way off.

That's exactly what I do. I have spent several hundred BTC on lots of stuff.

I need to keep a hotlink :)
Here
Protocol layer built on top of bitcoin, using messages in the block chain to represent transfers of value is one way of approaching it
https://bitcointalk.org/index.php?topic=226215
cvTokens design
https://bitcointalk.org/index.php?topic=197799.0
Freicoin
https://bitcointalk.org/index.php?topic=89843.0
Some other neat stuff
https://bitcointalk.org/index.php?topic=204283.0
https://bitcointalk.org/index.php?topic=88208.0

if people would sell their coins in smaller portions instead of dumping them all at once they would get more $ for their coins and the market wouldnt take a dive. but maybe they want to create panic selling to buy back lower.

Pretty much shake out the weak hands and what not its actually a really bullish point of view

My guess is a lot of them are cashing out in large quantities because they want to invest those assets in something else that they think is going to rise faster than bitcoin or into something with less risk. In those cases big dumps are the way to do it because you need the capital fluid for the investment.

I doubt that money is just going into their bank account to sit around doing nothing.

buy buy buy <--- this is the only way friend

Chicken/egg scenario. Once more mainstream companies go with Bitcoin payments the utility of holding Bitcoins for purchases will go up as more ways of spending them will become known. Right now bitcoins are mostly used as a speculative and dynamic trading tool which is completely normal given the market's infancy.

The only way to RAISE it, is to BUY IT for MORE than IT IS WORTH... (Loss)...

Problem is, all the ASICs are cashing-out for LESS than the market value, because they don't have LOSSES yet, and will keep cashing out, until they do have losses. They ARE waiting, as long as they can, but a few are not, and those who know this, are also cashing-out at a LOSS (under value), so they don't loose even more to ASICs. They are taking your VALUE, your cash, leaving you with a devalued BTC.

You want to make it live...

Cash out now, at any expense... wait for the ASIC's to drive it up again (Eg, once they have loss), and then buy them again at the lower price.

An ASIC can sell as low as $10 and make a profit from BTC/YOU. They will, because they don't have loss yet.

You are not helping BTC by keeping the price high, you are helping ASIC owners get rich, doing nothing... by keeping it high. Making yourself have more loss, while they have little loss.

The price of bitcoin is actually depressed right now because of the the funds leaving the bitcoin economy due to the mining arms race that is going on.  If you want to keep the price of bitcoin high I would suggest promoting companies that try to keep profits in bitcoin and encourage their own suppliers to use them. 

Note that even though is arms race is depressing the price of bitcoin it is greatly increasing its value and should be reflected in the price sooner or later.

i think your right, otherwise how will bitcoin ever stabilise.

I'm doing my part.  When the price drops I buy to bring it back up.  When the price rises, I start selling to bring it back down. 

 :D

This is exactly the problem right now.  As far as currencies go, the market cap of bitcoin is still relatively low, so it doesn't take a lot of selling to get the price to go down these days.  Once it becomes a more established currency, this will be much less of an issue.

I think the problem of price decreasing is for the new ASICs, people is trying to not lose their money by selling their Bitcoin so high as they can.
It was the obvious problem of the first ASICs aparition, then the GPU miner will go to scrypt coins like litecoins and wild drop that price too because of the big quantity of coins generated till the difficulty sets up.
I think that the solution is to hold our coins and wait to almost asics shipped and the strong up before the drop of this days.

Manipulating market is just stupid. If you keep price too low, shortages develop, if too high and forbid selling, miners can't pay their bills. (for new hardware plus electricity).

Let the free market decide.

It will be interesting to see what happens as the difficulty of mining BTC increases.  I have never been a miner, just a buyer, so I cannot speak from experience.  I would have thought that the mining community would see the value in just holding their BTC but then again, they have invested quite a bit of money into their systems and probably need to recoup those losses just to pay their bills.  I am sure that there are some mining and holding.  It would very interesting to know the percentage of BTC sold by miners is?  

The original idea is very good. In January I transfered 100 euros worth of bitcoins to a certain e-shop that only accepts bitcoin. During the next months I got to actually spend 1000 euros worth of bitcoins :D, so the a good approach would be just owning some pocket money in bitcoins and by spending it on goods you are basically taking out the returns in non-fiat way.

If everyone on the forum agreed to buy at a certain time that would definitly boost the price up.

Well, lets all agree now then.  When the BTC price hits $120, everyone go buy something nice!

This is one of the smartest things I've read on these boards. I know this because I practice this too. I have had very frequent situations where I'm selling 150+ BTC at one time. This is A LOT harder than it sounds. Fortunately, I have a business and finance background that has given me some trading skills and I'm comfortable doing this (I also have multiple exchanges besides Gox to use). I'm TERRIFIED at the thought of these ASIC users with zero trading experience going on Gox on trying to sell their BTC in large chunks. They can completely collapse the market without even knowing it. Its like a baby crawling in a dark room putting their fingers in things - "let me see what happens when I plug into this socket . . . "

If you go to a store and use your bitcoins to buy something, the guy who just got them will dump them in the market, so the overall effect on the price is very small.

Just to be clear, there is a very small effect, since there is that 1 hour wait for confirmations before the other guy can dump them on the market, but like I said it is a very small effect.

Thats not 100% true. There are services/exchanges that will let you cash BTC without any confirmations

Right, so then instead of waiting 1 hour there is no waiting, so it makes even less impact on the price. Thanks for accentuating my point for me.

You're not clear on the velocity of the marketplace. At this moment in time, being able to convert to fiat instantly is NOT a good thing. You WANT people to stay in the world of BTC. BTC will never be a viable currency until people want to earn it, spend it AND hold on to it. Otherwise, its just a play thing that no one will take seriously. Besides, the trading is so thin right now that a couple of large purchases that are instantly put on Gox can have a widespread, negative effect. In my experience (keep in mind that I deal with some LARGE wallets) it can take as little as 100BTC to really affect the price. When I have 150+BTC to sell I take my time, usually at least 24 hours, sometimes more. 

Oh, I think I understand about velocity. The higher the velocity, the lower the price can go. I am just saying that we have very high velocity, so it does not matter if you sell your bitcoins for fiat or if you buy something and that guy sells the bitcoins for fiat, the effect is the same. There is not much we can do about it either, unless you have several million dollars lying around to hold the price steady yourself.

Yes and no.
The guy at the store very well may dump some of them. He also may save some of them (I have a paper wallet that 5% of all bitcoin gross will be going to) and he very well may spend some of them. Retail is a sh*tty job, that mary jane comes in handy.

Point is that bitcoin will be circulating and the more bitcoin circulates the more legitimate it looks to those who are on the fence.

First time I looked at bitcoin was several years ago, it looked like geek play money, I didn't see how it had any utility whatsoever. Something for the nerds at the Star Trek convention to keep their mind away from the fact that they weren't ever getting laid.

Now it looks to me like it actually has some utility.

As more people give it a second look, having the currency in circulation buying stuff helps it build legitimacy and that brings in buyers and buyers keep the price up.

Yes, we want people to stay in BTC, but paradoxically the way to do that is to make it as easy as possible to instantly convert to fiat.

Increased BTC->fiat liquidity makes people feel more comfortable holding bitcoins, so they'll hold more of them. Whenever something happens that makes it more difficult to convert you see a price drop as large holders run for the exits out of fear of becoming illiquid.

Is it not the case that the reason most currency fluctuations are relatively small lies in the fact that central banks are there for intervention.

I also believe the sheer money supply acts as a buffer itself for national currencies.

The bit coin money supply is too small, and there is also concentration (some big holders), so I would expect volatility for quite a while.  When I look at Mt. Gox daily volume it's a tiny amount.

Wider acceptance can help smooth things out.

Also, the fact that arbitrage opportunities exist is indicative of a market where information is not flowing smoothly enough.

I would be interested in the total number of wallets in existence, and how that is trending over time.

At the present time, the people who can unload large amounts of coins are really the ones who have the biggest impact on price--not average joe shmoe like me

That's my 2 cents.

Hey, if you're a believer in bitcoin, just consider this a buying opportunity.  The price will recover eventually and you'll get your bitcoins a lot cheaper when these guys are dumping mined coins on the market.  Their inexperience is our gain.

I've been happily buying bitcoins at these low prices the past week. Honestly I don't even day trade etc much anymore. I just really do enjoying using bitcoin now for online transactions.

Given average daily volume of 50000 bitcoin, you need only a couple of million dollars to hold the price above 100, not a big deal for institutional traders. Exchange price usually is a consensus, and for bitcoin the consensus is that the value will rise sooner or later due to limited supply

The mobile payment is the future, since in mobile payment you need to convert money, that step is always needed, so bitcoin is no different than any other mobile payment solution, and it has super low fee

My reason for buying Bitcoins is that if it becomes the world currency I will have some and they will be worth a lot. I'm not interested in games and playing the market. Buy as many as you can afford or afford to loose and then leave them.

Everything goes up and down in value... gold, stocks, oil, fiat currencies, etc.  Price is not really something that we should try to control in a free market.  Bitcoin is just very young and is still thinly traded compared to other markets.  It will continue to have large swings up and down until its trading volume goes up 100 fold or so.  Even then it will vary, just not as much.  So use the down swings to buy more.

If you're that worried about it then wire some dollars over to Mt Gox and be ready to buy up cheap coins when it happens.

It seems like every time I think of buying something with BTC, the price drops, so I end up paying more.

Given the wild swings of bitcoin prices, I really think any merchant worth his or her salt would peg the prices to the exchange rates so that customers aren't screwed over when it changes.

Haven't read all the replies. But here is where the idea of 'buying something nice instead' fails. We are still not at the point where a business can function without any fiat money at all. Imagine the business that is taking your Bitcoins needs to cover their costs with USD (or similar) and is likely forced to sell some or even all of the coins through exchanges. That leads to the same effect in having a prize drop. It might be worse because they don't care about the maybe already low prize, they just want to get their costs covered with almost no risk. This could lead to a much worse prize drop. I'm not saying all the business will do it, but I think most of 'em will.

Doesn't matter. Example:
Buy 1 BTC at $100. Hold. Buy 0.25 BTC for $25. Find item for sale that has its price pegged to $125, but by that time the exchange rate had dropped, so the 1.25 BTC is insufficient. The $125 peg requires, for example, the purchase of 0.10 more BTC for $9.26 (assuming you buy at spot, no fee). In the end you will have to spend $134.26 to buy a $125 item.

I see this happening to other people all the time... "I came up short, need to buy 0.xx BTC to make up the difference because of the rate drop", paraphrased.

Murphy's law at work.

How much fiat money does Satoshi Dice need to handle in order to function?

It works the other way when the price is going up. Buy 1 BTC at $100. A while later, after the price has risen, you go buy the thing which is pegged to $125 for your 1 BTC. Now you spent $100 to get a $125 item.

When is the price going up, and how often?

it's an idea. but nope, won't happen.

It is not just about you earning income in bitcoins and then spending bitcoins, if the person you pay bitcoin to converts them to Fiat currency that is exactly the same as if you do it yourself, it creates the same sell order on MTgox or equivalent. The value of a bitcoin is a simple supply/demand equation, more buyers than sellers price goes up, more sellers than buyers price goes down. <- its obviously more complex than this - but this is the core.

For bitcoin to continue to advance in value we have to eliminate the selling of bitcoin to buy fiat from the cycle, this means getting people like utility companies and supermarkets and farmers to accept bitcoin in payment. We need retailers and the suppliers of goods that ordinary people use to be prepared to accept bitcoin as payment - and for them to be able to pay their suppliers in bitcoin. If you can buy food and energy with bitcoin you can meet your basic needs from bitcoin alone, if you can do that you can be paid in bitcoin, and from there bitcoin becomes an alternative to Fiat and we can stop worrying about how many USD 1BTC is worth because it will not matter.

There's already a website that handles billpay in bitcoin: https://www.billpayforcoins.com/index.php, which should take care of the utility companies part of the equation, they aren't even charging any fees for it (for now).  Getting supermarkets to accept bitcoin would be much harder though because intermediaries like this wouldn't work like this unless you're one of the rare people who buys all your food online.  It's also harder because unlike utilities which there are relatively few of, there are a lot of different supermarkets.  Not an impossible task, but definitely difficult, I would imagine.

You can't do anything to "keep" the price high.  The price will always reflect the current supply/demand situation.

Whatever it is you are doing please stop. It didn't work ;D

Everyone is selling... :-)

If Mt. Gox keeps their word and allows for cash withdrawals for USD tomorrow, we will see a massive buy back in and the price will shoot up I would imagine.

I think people are just anxious.

I really hope you're right, it'd be nice to regain the paper loss since I bought my bitcoins.  I feel dumb for buying them when they were at $100 now, but oh well.

If you believe bitcoin prices will in the next 10 years become worth 1000s or even 100s of 1000s of dollars like some people suggest, wouldn't you want to keep prices low, not high?

I would think you'd want prices to be high only if you were one of the lucky few that picked up 1000s of coins at the very early stages OR you wanted to sell your coins now.

yeah i've been buying whilst they are low thinking its hit the bottom, and it just drops further and further! i am ok with it at the moment though :-) theres a few things i wanna buy in BTC so let it keep dropping! haha

 ??? You people should read some books on trading/investing/economics. Seriously. Anything.

i got it!

buy some cocaine with btc in the silkroad and sell it for usd. big profit!

shallow orderbooks are a problem... but I think a bigger problem is that everyone and their brother pegs their prices to gox - so any time it's affected everything else follows it. Specifically, speculators on every other exchange. It isn't efficient in the sense that it being arbitrated - people are just following that single market to set their price.

All this talk of keeping the bitcoin cycle closed is crazy. If the market price for bitcoins is too high, it will drop.

Could you imagine what would happen if Canadian dollars would only hold their value if people didn't exchange them for American (or anything) dollars? We would be in a lot of trouble in Canada, and wouldn't be able to buy anything but beaver pelts and corrupt politicians.

That is Argentinian talk.

Once the market is big enough there will be a lot less volatility. But there is only one thing to blame for the falling price, lack of buyers.

Actually, the mtgox price has been lagging behind the other exchanges. I guess the mtgox users are just sheep following btc-e and bitstamp.

Long investors would be wise to be patient.   Bitcoin services are growing rapidly and are becoming more professional which attracts a larger user base.  Ultimately the value of the currency will be determined by the value of the goods and services that can be exchanged for it.  Pay close attention to businesses that require bitcoin and accept no other method of payment.  According to the following Forbes article business is booming and competitors are entering this space. 

http://www.forbes.com/sites/andygreenberg/2013/06/26/bitcoin-black-market-competition-heats-up-with-pro-marketing-and-millions-at-stake/ (http://www.forbes.com/sites/andygreenberg/2013/06/26/bitcoin-black-market-competition-heats-up-with-pro-marketing-and-millions-at-stake/)


Studying the economics of mining is still a worthwhile endeavor.  Obviously the higher difficulty drives prices up assuming all other factors remain the same.

My interpretation of the charts is that bitcoins are slightly undervalued right now when using mining as a cost basis.  http://www.bitcoinx.com/charts/ (http://www.bitcoinx.com/charts/)


ASICs are having a profound impact on mining.  Be sure to experiment with bitcoin mining calculators and try simulate market conditions.  It's hard to estimate just how much ASIC hardware is out there on the network.  A lot of it may be in the dark.  Not everyone who makes ASIC hardware sells it.  Some manufacturers put their ASICs to work for themselves.   There is no way to know how much of this activity is going on. 
http://www.bitcoinx.com/profit/ (http://www.bitcoinx.com/profit/)


In the end the miners are there because there is a burgeoning market need for bitcoins; it's not the other way around.  Look for business growth, media attention, wider consumer adoption, stuff like that if you want to predict the long term price of a bitcoin.

I've been mining Bitcoins.  So the higher the price, the higher I can sell my coins for.  The electricity I paid for them is fixed, so the higher I can sell them (or trade them) for, the higher returns I get.

also the less bitcoins mined per miner (as a result of difficulty increase) the higher the price each individual miner has to sell at to break even :)

Or just buy some network and let it grow for 10 years
Of course if we can even feasibly imagine what it will be priced at then xd

If like to keep higher than 266 USD, then what is the factor to keep that up?

Usability, Development and attention  ;)

you just need more people using it.  a billion dollar market valuation is not a lot in the business world.   266 or higher could be reached with a multibillion dollar valuation.   we need to develop an economy that large.   it's happening.