Bitcoin Forum

Hello,
I wrote an article on my site (http://tattlecoin.com/2011/rumor-bitcoin-falling/) about why I think Bitcoins have been losing value over the past couple weeks. I think it all boils down to the fact that Bitcoin is a deflationary currency. Anyways, I'd love to hear what you all think!

-Wolf


My article,

http://tattlecoin.com/2011/rumor-bitcoin-falling/ (http://tattlecoin.com/2011/rumor-bitcoin-falling/)

Except that Bitcoin is at a 50% inflation right now.

Gold is also a deflationary currency and yet its price is skyrocketing.

But if people were mining gold faster than people were buying it, it too would be losing value.

A lot of the people in Bitcoin are just treating it as an investment, but there are a lot of people, myself included, who have actually spent some coins on businesses that take Bitcoin. I honestly think the recent value drop has more to do with the fact that markets just change than anything. There's certainly been enough unrest in pretty much every other market the last couple years -- to expect that Bitcoin wouldn't experience some of the same is unrealistic.

Anything that makes investors flock to "safe bets" like government-issued bonds is going to hit Bitcoin to some extent because right now we simply have the fiat value set primarily by traders and speculators, and there is currently no real reason to buy bitcoins for the purpose of spending them. If that were to change the whole definition of the exchanges' markets could change as well.

Looks like you speaking the truth. Maybe once all the bitcoins are issued people might start spending them.

Where did you get that statistic?

Gold is about to explode. There are plenty of investors shorting gold right now.


I've used bitcoins to buy products as well. I think that all markets change, but you can find definite reasons for those changes. I totally agree with you on the last part though. There is no incentive to use bitcoins for online transactions yet. Almost all of the BTC businesses have predecessors that use USD.

We only have 3 years to wait, right?

Its been on the decline for about 2 months now give or take a few days.

Right now its at $7.40 and falling.

I think the whole mybitcoin incident might have something to do with it.

they will all be out in the year 2140...

This has nothing to do with the number of people buying bitcoins.

It has everything to do with their real value which is 4-7$ right now. The amount of power needed to generate them is their value.
This is their base value. Anything more would need a real economy behind bitcoin which is pretty much non-existent.

So to anyone complaining who hoarded their bitcoins and didn't buy anything with them: Its your fault and your fault alone.  :P

BTC is losing value.... hmmm why is this.... hmmm.... could it be that their is more supply then demand??

SELL SELL SELL!

Why is BTC losing value?
in ten years the answer to this question will be simple .... Its the weekend, everyone is shopping!

Here's the problem guys.. we're printing more bitcoins than Zimbabwe is printing their dollars.    This is going to continue to go down until next year when it get's cut to 25 bitcoins every 10 minutes...  even then it's still going to be highly inflationary.  

We need some venture capital firms lining up to work with bitcoin companies,  we need places to spend them.. we need more people using bitcoins.. not less people with more bitcoins.

In this case we need 100,000 people with 1 bitcoin each than 1 guy with 100,000 bitcoins.  

because currently we have the latter, and we need the prior.

That's a misconception of the market, actually most of the liberalism havoc is due to such "linear view" of "supply and demand".
Between supplies and demands there's speculation. Actually the gold will not be "skyrocketing" much longer as speculators by betting so much on gold's future are in fact removing value of it. You see... things have value based on their use, they're worthy or needed and cause demand, more demand = higher prices. By speculation, gold hasn't any demand on its main purpose, jewelery, as being so expensive it becomes a bad investment and ultimately a danger to its bearer.

The same went on with Bitcoin, by being so deflationary at such fast pace it literally broke all bitcoin-based businesses, what created less demand and speculators were just inflating a bubble of something themselves made worthless... just what they're doing to gold now and something else when the current gold bubble blasts.

http://cdn2-b.examiner.com/sites/default/files/styles/image_full_width/hash/a8/b0/ps3_42.jpg

http://3.bp.blogspot.com/_jYu-ZDMVJfs/S-2AvittfiI/AAAAAAAABU8/p6-CZZ5LSVY/s400/haribo_gummi_bears_package.jpg


https://goldsilver.com/news/fiat-currency-is-the-bubble-not-gold/

USD = bank accounts = real names and identities

Bitcoin at 50% inflation:
https://bitcointalk.org/index.php?topic=3105.0

So bitcoin had lets say 75% inflation from summer last year to summer this year, yet it managed to go from $0.06 to ~$10. Apparently inflation is not the most important factor.

No. And really.. No.

It's adoption rate grew faster than 75%. ..  Then adoption rate was 3000% now it's 20% and inflation is 50%

We need to get more coins out to more people

But there will be 33% inflation next year. So inflation is dropping.

Perhaps people should start buying and selling things with Bitcoin. Perhaps on BitBid.net. :P

Why do we need to do that? To ensure the position of the bitcoin wealthy?

I’d say we need to polish the Bitcoin client, infrastructure, everything, before we try to attract new people.

/thread

The current declining state of new speculator blood provides an excellent opportunity to get our heads screwed back on straight.

1. Would be very nice to see the client or a good client overlay with the ability to generate a single use wallet with a new address to send a predetermined amount of coins to that let us pick the location the generated wallet was placed. i.e. flash drive, etc.

One thing I wanted to add: All this stuff about generating media interest, getting more people to join and invest etc. makes Bitcoin sound like a pyramid scheme to me.

If Bitcoin is found convenient and useful, people will come on their own. Currently it’s not very convenient or useful for most.

+1

There are almost too many fallacies in this thread to even begin, but let's try...

1) OP - your thesis is self-contradictory. You are claiming that bitcoin is deflationary, thus its price rises relative to goods, thus nobody spends it, thus the price is falling. Well, I must ask, if the price is falling relative to goods then it's suddenly an "inflationary" currency so people should spend it. This whole deflation argument is a fallacy - work your way through the whole process and you will discover that it fixes itself. It's the same reason you buy a new computer even though the same computer will be half the price in 8 months.

2) Bitcoin is not deflationary. It is perpetually inflationary at a decreasing rate. The fact that demand may increase so quickly as to drive up the market price is a question of demand and supply, not quantity of money. The quantity is always increasing at a decreasing rate, thus it is always inflationary until that last coin in mined, at which point it will be neither inflationary nor deflationary, but static.

3) Contrary to popular belief, spending Bitcoins does not make them more valuable or bolster their market price. In fact, the opposite is true, when you sell a Bitcoin in exchange for a good, you are expressing a preference of the latter over the former and increasing the supply of Bitcoin while decreasing the supply of goods. In other words, every time you sell a Bitcoin, whether for USD or a good or service, you are increasing the market supply of the coin and thus it's relative price will be slightly less. Consider the counter-factual: if nobody ever sold a Bitcoin for anything, it's price would rise to infinity. If your goal is to increase the BTC price, don't ever offer them in a transaction for anything.  

4) The supply and demand for coins on the market dictates their price, nothing else. The "mining difficulty" doesn't matter. It's super hard for me to mine mud from the bottom of the ocean, but I reckon the market price of such mud would be less than impressive. The value of Bitcoins is not "backed" in any way by the difficult of creating them.

5) The price of Bitcoin is greatly affected by the fact that 7200 new coins are mined each day. However, this number was the same back when we were at $30 per coin. The much larger driver of price is market psychology. When people are feeling good about Bitcoin, they buy it and when they feel concerned they sell it. Miners producing those coins will stop putting them on the market the moment they think the price is likely to go higher.

6) A good speculator knows that the mood of the market is often wrong. It is precisely when price is low, yet value is high that you should buy something.

And while the price has been falling these past months, the value of Bitcoin is much greater than it was a few months ago. It is maturing rapidly with new usefulness. Merchant solutions are finally now available. Casinos like Strike Sapphire have launched. Prediction markets like Bets of Bitcoin have launched. Massive retail offerings like BitcoinDeals are in testing. And there is much more going on than the people on the forums realize. Plus, we've now seen just how resilient Bitcoin is, surviving numerous scandals over the past few months. Even the perceived threat of new forked chains is proving totally unfounded. The Bitcoin ecosystem is being constantly bombarded with problems and inoculated against them. And STILL no significant bug or vulnerability of the Bitcoin protocol has been found.

You make a valid point, however imo this is a fallacy.
There is something as a middle ground of how much something to be supposed to serve as money can be hoarded and spend to give it its most value - as a percentage.
In the case of bitcoin a very vast majority is hoarded and even when transactions take place it is just so in order to be hoarded by someone else. Take the example of gold. There is and was always a significant percentage of it used for practical use, and/or barter and trade. Industry, ancient gold plating and so on.

What the actual percentage would have to be depends on the circumstances but from what I've read it should be 50% or at least some double figures. Trying to guess how many bitcoins are actually used as a currency makes me faint, it might be something like 0.0001%.
The effect is very high volatility because the only way to value it are the expectation of future value (which _have_ to be based upon it's later expected value as a currency at some point) and the costs to generate it.
If we had actual business transactions taking place not only would it buffer the decline a growing economy would actually boost it's value.

Agree!!!

But, more people should have the already mined Bitcoins...

Most Central Banks are not and China is increasing its gold reserves as a strategic policy to destabilize our dollar.

At least that's what the US State Department believes. (http://cables.mrkva.eu/cable.php?id=204405) (3)

Shorting Gold is financial suicide.

+1

excellent post.

Bitcoin is GROWING. that's the bottom line.

I had to save dollars to buy a car, I have brought small items with BTC but am saving a larger portion of my bitcoins because I wish to buy a home with them one day and hopefully a straight btc deal. Whats so wrong with that? I dont spend every dollar instantly because its used to buy things with.

Lol...

Negative growth is still growth! :-)

Aahaha.. yeah, so if you end up being the only one in 2140 who has any bitcoins, that is still fine, because you have now 21 million of them and it has still been GROWING! :D
Also, because you now hold ALL... the coins, YOU.... can set the price, so.... they are worth... MASSIVE.... ammounts of.... MONEY!

UP UP UP!

In 2140 one of these will happen:

* Rise of The Apes
* Skynet takes control of the world
* Skynet did rule the world, but The Sage of Six Paths (Naruto) learned how to manipulate bio-energy into superpowers (e.g. Rock Lee of Naruto moves faster than a vampire), taught people it, and they faught off the machines.

$6.90 and falling...

Holly Crap! Whats a real grown-up post like yours doing in a thread like this?!?
 ;D

No we need to attract money launderers and tax evaders.

Probably lol.

Lots of resident aliens here in the states send money back home.  Often incurring huge fees or w\ large cash amounts risking their cash.

Teach those people bitcoin or do it for them and it'd boom

How can we do that, airdata?

Bitcoin... En Español!

Wouldn't help at this point, Bitcoin already has a ton of bad press and experienced a major bubble. You might as well try to convince someone to invest in a nebulous internet startup company.

in a similar thread I stated I cant help feeling all this in-fighting, hacking and general 5 year olds behaviour may of damaged peoples confidence in btc too

Sorry have to call B.S on that.  Ok I appreciate its a complicated system but lets consider:

I have these special 5 rocks, they are pretty and there are no others like them in the world.  I have all 5 so they must be worth unlimited fiat currency right?  WRONG

See you have no interest in my rocks, they are not useful to you hence worth nothing to you.

The only way bitcoin is worth anything is if its useful to people thus making them want it... on the simplest level being if they can be exchanged for goods.... the only reason merchants will work to accept BTC is if people spend BTC, then we have all sorts of cool stuff you can get with BTC, then maybe people will want to earn BTC, thus BTC for services and labour....

Hoarding BTC does sweet F.A for bitcoin.... in fact I'd only hoard if I was confident in everyone else doing the right thing and making it worth something regardless of my not being involved.... thats one of my other gripes about early adopters being a security threat to the btc money base but thats another thread :-)

If satoshi is dead he'll be frikin spinning in his grave at your comment.... BTC is only worth what someone will trade for it.... the fact it interfaces with other currencies is only as a vehicle for others to acquire the currency, supposedly because they want to spend it.... or worse still they want to join the hoarders.

Thats my 2c

I would like to offer 100 ClusterCoin for your 5 special rocks  :D

Hmm I dunno, my 5 special rocks are very dear to me.... erm emotional ties etc :-)

Besides I'm too distracted by the fact MtGox has done more trade in the last 2 days than the whole week previous, me thinks some people are cashing out.

Translation of this load of baloney: «Hold the door for me while I cash out»

That could be very easy, one "only" has convince Gavin to use bitcoin-qt.

People need confidence to put their money and effort in bitcoin and I think a few thinks at this time that rock that confidence include (and please these are not stabs at people or groups just matter of fact).

1) bad press: one thing after another and one spat after another leaving us looking like squabbling fools.

2) appearance: ok so realsolid acted like a dick but the outside world needs to see a little leadership and organisation, such as better tools for enabling merchants to set up etc (like the promised solidcoin API).

2a) less ridiculous actions like that of artforz (or wheover he is) think of someone looking to invest in bitcoin.... from the outside his actions look like that of a very socially mal-adjusted individual much in need of a woman's first touch.  People outside the project see peeps like him inside and perhaps in an ill-informed thought process probably fear the havok he wreaked.

3) hoarders syndrome as pointed out above.  There are many, some early adopters some freak miners who have large stashes of coins due to the very very slow launch of bitcoin.  That represents a risk to the security of the money base.  Those users are not helping bitcoin grow and when they do cash out or get robbed they hurt bitcoin all over again.

4) freak miners.  I say freak but only because I can't understand what posses someone to but 30quadzillion gh/s of mining rig.... I mean is it a fevered gold rush "woohoo giddady giddady yehaw I'm gonna be rich an get me some people teeth" ??? I dunno.  However the falling price of BTC only proves the point that someone would think "so how long will these people be able to run all this kit when they are earning no money?" well the answer is probably not long so great swaves of the networks hashing power could suddenly melt away.  Its a shame really as bitcoins greatest achievement is the fact it draws strength from being decentralised... miners should all be casual miners in bitcoins best interests..... a casual miner being one who on their current income from they day job can run the kit they have indefinitely with profit or NOT because its fun, plus nice to give back to bitcoin.

Thoughts or anything I've missed?