Bitcoin Forum

Let's say Bitcoin's price stabilises  where it is now, and remains like that for a few months. Given the fact that the vast majority of Bitcoin transactions are currently for speculative purposes, is it reasonable to assume there will be a fairly monumental sell off? Therefore it could be said that for Bitcoin to  maintain the engagement of the userbase it has attracted it will need to provide speculators with continual profitability.

People will keep coming to invest if the price keeps rising. Publicity will take car of that. We've reached 500$, next week a new horde of investors will come. When we reach the milestone of 1000$, this will be even more widely publicized and an even bigger horde of investors will come. And so on.

The music will most certainly stop..... but Bitcoin will stay.

If the music stops and a selloff happens latent buyers will try to get in driving the price back up again.

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

Investors indeed, because Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency. Bitcoin has developed a Forex market prior to establishing itself as a currency with widespread utility.

There is a lot of truth in that. Bitcoin is a speculative investment vehicle, but unlike most others one cannot readily short it. There is no counter to the irrational exuberance.

Who decides whether or not the exuberance is irrational or not?
How can you be sure that it's not rational?

Who in their right mind would short bitcoin? I mean, yeah in short time frames during crashes it makes sense, but bitcoin is in a perpetual up trend. Shorting bitcoin would be dangerous.

Also, shorting is not a natural market feature. You can buy bitcoins. You can sell bitcoins. That's a natural marketplace. As rational or irrational as the exuberance may be, saying you need to allow shorting to keep it in check doesn't make sense to me.

Who says you can't short? That possibility exists, for example on bitfinex, but you will notice it isn't used much, or rather: there's not much weight behind it. Which is kind of understandable if one considers that, except for (relatively) short periods of time, the only direction of $/btc is up uP UP.

Why do you say this? There is no reason that Bitcoin cannot be both a currency and a store of value (speculative instrument) at the same time.

You see, phrases like 'perpetual up trend' are always going to come back to haunt you.

At the moment it is neither.


A store of value can be relied upon to return to you at least  roughly what you put in; you might make a lot of profit, and if you do lose out it won't be a massive loss. It is stable and reliable. Bitcoin has been both a money making and money losing proposition for those that have been invested in it, but it has never been a stable store of value.


Think of it this way. You have 100M dollars worth of gold, and you can either keep it as gold or covert it to Bitcoin. Whichever you choose you then cannot do anything with it for 5 years. Which option would you choose any why?

In those 5 years Bitcoin might have hit 4 figures, and then crashed back down to ziltch.

I actually think this is the natural and logical progression. First, bitcoin will become a replacement for gold in many people's investment portfolios. As that happens, the price will go up very fast, until eventually everyone who wants some bitcoin has some. Eventually it will level off and people will start using it more as a currency, for commercial transactions.

The reason we're not seeing a huge amount of bitcoin commerce yet is precisely because it's currently functioning more as a highly lucrative investment vehicle. But the era of 10x gains per year, or even 2x gains, is not going to last forever. I'd give it just a few more years. Then, mass commercial adoption as the last phase of bitcoin's growth.

For more of my thoughts on this, see the thread I started, The Four Phases of Bitcoin Growth: https://bitcointalk.org/index.php?topic=337151.0 (https://bitcointalk.org/index.php?topic=337151.0)

There will be silence.

Gee, you don't think that's because there are lots of financial instruments that can be used to leverage huge amounts of money on Forex markets?

Moron.

And having see Bitcoin go on a price rollercoaster for a couple of years, what pray tell will induce retailers to accept it? I mean they might just get the impression that a load of speculators in tulip bulbs are looking to offload their currency onto them.

The higher the price goes, the bigger the market cap and the more people are involved, so it would take more people and more money to move the price. Therefore, the price should in theory become more stable as it gains value, which will make it more viable for use as a currency.

When the music stops your fiat won't be able to buy farmland, gold, silver or Bitcoin for ANY price  ;)

Do you have any idea how Coinbase or BitPay's payment processing works? Merchants can select whether they want to receive payment in USD or XBT. There is no speculative risk if the merchant doesn't want it, and most won't until price stabilizes.

The great thing is, both services charge a flat 1% compared to VISA / MC average of 3 - 5%. This is because bitcoin is insanely efficient as a payment vehicle. There is no ACH necessary for a transaction anymore. That's a big deal. It is the next step in the evolution of payment systems, and what merchant wouldn't want to save 2 - 4% on transactions???

The risk does not disappear it is simple put onto the payment processor. And what about fraud, how do customers deal with dodgy merchants?

The risk is trivial. The payment processor has the option to liquidate for USD as soon as the transaction clears. As far as dodgy merchants, I know BitPay and Coinbase have a merchant application process to validate merchants for a number of reasons. There is the possibility of a bad merchant still, but I'm sure when this Bitcoin thing gets bigger, regulation E will probably be applied to processors in this space.

How is the rick trivial? Just in the last few hours Bitcoin has fluctuated enough to cost a payment processor a fortune.

When I see people start threads like this, it is obvious that there is a part of them that wants to believe and get behind bitcoin and either they are too afraid, confused, or just have no money to invest.

There is no reason ravens would be hanging around this board otherwise. He is asking these questions because somewhere inside of him he is hoping someone can make a compelling case and overcome his fears.  Or he is just a bored troll. But I think most of the things I just mentioned are true of the trolls on this board too.

Because the processor can create quotes based on the depth of the bids for whatever source they use to liquidate BTC. With BitPay, that quote is valid for 15 minutes (too long in my opinion). So, unless there is on average, more than a 1% drop in price in 15 minutes, the payment processor is coming out ahead. Sure there will be times when XBT price drops more than 1% in the allotted 15 minutes, but in this historically upward trending market, the opposite is more likely.

+1
The market has already proven him wrong countless times.
@OP "It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt." -Mark Twain

It's amazing how many people don't understand this.

If there are a billion bitcoin users, a billion dollars in or out at once only moves the price $1 per person.

Yes, I understand about available coins and unmined coins and all that, but the point remains that the more people that are in, the less you can move the market even with ridiculous amounts of money.

he can you guys help me here with a bitpay question

I paid for something on friday and I messed it up somehow, i sent 1.5 bitcoin when I was supposed to pay approx 2

so my bitpay transaction is frozen as "invoice expired before fully paid" on bitpay.

what happens if I do the following

1) call the merchant to ask them to contact bitpay, and release the payment to then even though it was too little? does the merchant get the USD amount for the time of the transaction from friday when the 1.5 BTC were sent? and I can just send them the difference in USD?
2) contact bitpay and ask them to refund the transaction? how does that work? do i get back 1.5 BTC back or do i get the equivalent USD back in BTC as of friday rate? now obviously less BTC than 1.5?

not true if people hoard. Lets say there were 1000 coins total for argument sakes.  each person has 1 coin, 1000 people and each coin is worth $1

but 950 of those people think bitcoin is the best thing ever and they will never sell or use their bitcoin, because they love it too much.

now there are only 50 people left who are willing to sell their coins, so 50 people sell.

of the 1000 new buyers who each bought 1/20th of a coin, 950 think bitcoin is the best thing ever because the price has shot up, because people had to pay a lot more to get those available 50 coins, each 1/20th of a coin went for $1 - since $1 is the amount the average citizen can spend. so a full coin is now priced at $20!

so now you have 1950 people holding onto 995 coins, and 50 people left who are willing to sell a grand total of 5 coins. imagine the price of the remaining 5 coins when the next group of 1000 want in.


and so on.......

and therein is the problem with bitcoin which is what we are seeing now. It never makes sense to use them or sell them, until what?

here comes the BIG problem - all the money dumped into these coins is no longer in the system. The sellers have taken the money and run, they are out the system. That equity is long gone. The only thing holding up the entire system is the next wave of new buyers, that is it!

 my theory is that the day of reckoning comes when a large group finally cashes out, which cause the unwinding of the above scenario in reverse - panic selling to get something, anything out of the coin you thought was priceless. But we shall see.

Even speculators and bots are to be counted as buy and hold forever types, because although they sell they ALWAYS buy back in again at a lower price (or a higher price if their trading is no good)

and this is EXACTLY what is happening. Take bitcoins biggest exchange, BTCchina. Do you know how many bitcoins are for sale up to 25 000 cny? (right now its at 3 600 cny)  - a  total of approx 2 000. Yeah thats right, out of a total of 12 000 000 coins, the worlds biggest bitcoin exchange has 2 000 for sale - TOTAL

I actually think this is the best explanation of bitcoin price action I have come up with to date.

I read somewhere there's a word for this... think it starts with a P but not sure.

I'm pretty sure I've seen this argument thoroughly debunked before. If the market is liquid enough, any investor can cash out large amounts without shaking the market. I think the best a group of large, coordinated investors could do is manipulate the market price, but they risk their precious coins in order to do so.

please see my addendum regarding market liquidity on BTCchina to see what I mean by no liquidity at all.

Always subject to change. Everyone has a price to buy/sell.

yeah but you missing the point, the money that went in to get the price that high has left the system long ago.

there is no equity left at all without new buyers - literally none, zero. so you need the new buyers to show up in force, and not be afraid of buying into a falling market, and not be overwhelmed. There are no shorts in the bitcoin market who are going to turn buyers either. Its a vacuum the whole way down to zero without new buyers.

I have alarm bells I didnt even know I had going off right now regarding bitcoin.

Interesting theory. However, I think there might be one factor you're overlooking. Many people will sell when they decide that other investments will net them a higher ROI than bitcoin, but they will not all decide this at the same time. Some people might sell now, others might sell a year from now at $2,000 per coin, and others might wait to sell until several years from now at $10,000 per coin. As that process happens gradually, the growth curve will become less and less exponential and eventually reach an equilibrium where further price increases will come only from the difference in inflation rate between bitcoin and fiat currencies. This is the "end state" of bitcoin as a speculative investment, and then from an investing perspective it will only be useful to protect one's assets against inflation, i.e. in the same category of investments as treasury bonds. When that will happen, and at what price, is anyone's guess, but I would predict somewhere between $10k and $100k per coin, sometime between 2015 and 2020. And I also think that's when bitcoin will really start to be used for commerce, because the investment/speculative mentality of buying in to get a high ROI does cause hoarding, but that phase will end eventually, when the price reaches an equilibrium with fiat currencies, and then people would have less incentive to hoard BTC and may be much more willing to spend it.

not if the market cap is based on a false premise - an ever shrinking *available* supply of coins which forces people to pay ever increasing amounts for less and less coins. You understand once the money goes into bitcoin, the seller walks away with it? which means bitcoin has NO equity in it at all?

How many financial commodities have you traded?

If you buy gold at a $1 and it goes from $1 to $2 and then I buy it from you for $2. Then you leave the system. Does gold lose it's equity?

Bitcoin is not a stock.

And you entire premise is based on the idea that 95% of bitcoin owners will be buried with their coins.  Not everything you see is happening on the exchanges. Check the logs. The original adopter coins are circulating more and more into hands of new adopters. You can track these things through the blockchain. Bitcoins are dispersing.

It makes sense to use them when someone will sell you something you want for bitcoin. I will happily spend bitcoin to buy a yacht when I think the price is right. I do not mean sell bitcoin for fiat then buy the yacht with fiat, but actually pay for the yacht directly with bitcoin. As the value of bitcoin rises more and more people and businesses will accept it as payment. That is how the problem you are concerned about will be resolved.