Bitcoin Forum

I watched a talk on the economy between Peter Schiff and Joe Rogan; at the end they discuss Bitcoin, and Peter shares his criticism. He says, essentially, that the more merchants that are accepting bitcoin the more the price of bitcoin will fall, because they instantly convert it back to fiat (thus putting in SELL orders). So customers who own bitcoins and use them actually sell them onto the market, indirectly. This wouldn't be a problem if bitcoin was the main currency for merchants, customers, suppliers, etc, but that is not on the realistic horizon yet.

So, I was wondering, could this be part of the reason why prices have consistently gone down as merchant acceptance has gone up?

Reference: https://www.youtube.com/watch?v=8IHU42j3evQ (@2:36:15)

Peter is a smart investor but wrong about Bitcoin due in part to not understanding the technology completely and partially to protect his investments in gold and silver which are being negatively impacted by Bitcoin.

Even if merchants immediately sell Bitcoin that doesn't drive down the cost of Bitcoin as the individuals spending bitcoins typically are re-buying on a regular basis or immediately. While it would be better if merchants kept bitcoins it still is beneficial for the eco-system because the larger amount of transactions floating around show the demand for this payment mechanism and temporarily tie up those funds causing more demand overall.

 

There are three stages:

Merchants not accepting bitcoins.
Merchants accepting bitcoins but converting them immediately to fiat.
Merchants accepting them and keeping a bitcoin holding.

This is a progression which must be undergone before Bitcoin can reach a plateau as a widespread and significant currency and payments system. It says a lot that the argument is moving from the inane Bitcoin "scam/ponzi/laugh" to Bitcoin "can't be successful as it is swapped for fiat after use". It means that the detractors are losing ground.

This is just BS. Don't these people have any common sense? From where will all those merchants get Bitcoin? Bitcoins are not created out of thin air. Their customers will convert fiat to Bitcoin (or just mine them) in order to pay for goods and services in BTC. So for every 10 BTC worth of sell orders, there will be an equivalent 10 BTC worth of buy orders as well.

Peter also likes to beat the tired "it's really volatile!" drum. Well, duh... We're bootstrapping the world's first decentralized currency from nothing to global scale. Of course is going to be a wild ride!

Peter's criticisms are almost always quite myopic. He basically resorts to saying bitcoin will never work because the ecosystem has flaws *now* (eg, his focus on volatility and merchants insta-converting). Anyone who says bitcoin is a bad idea because it doesn't go from nothing to global domination in one perfect binary step is either stupid or trying to manipulate the conversation.

FWIW, Peter's brother and business partner, Andrew Schiff, seems a little more open to bitcoin. I spoke with him after a debate with Jeffrey Tucker a couple months back. Andrew is clearly influenced by his brother's stance, but also had some criticism of some of Peter's opinions, and was far more content to basically say "let's wait and see; maybe it'll work" than Peter is. Too bad Peter's the more public celebrity, though.

Peter will change his tune as he sees BTC is overcoming the early growing pains.  :)

Necessary evil for now

Why can't a business hold and use bitcoin as they do fiat? Because not enough business's accept bitcoin for everyday use (for rent, suppliers/manufacturers, payroll, and whatever other various bills) so the next step is creating bitcoin ecosystems

It would be great if Overstock or some other large company offered employee salaries and bitcoin as a form of payment to suppliers, I'm sure they could save a ton on money transfer fees for large orders so it could be beneficial to both

If merchants don't accept bitcoin, we should all sell.  The hope is that someday merchants will accept and eventually keep.  Not just merchants, but everyone. 

Merchants adoption is positive. I understand the point you are trying to make but merchants only drive the prove down because all of a sudden the amount of merchants increased a lot, while the number of bitcoin users did not increase nearly as much. So there's a lot of selling pressure. However we managed to break the negative downtrend even with all the selling pressure so we are fine.

Also, having more merchants makes bitcoin more legitimate, since it's more valueable as a currency if it can be used frictionless at more stores. And the selling is also a good thing because it adds liquidity to the market.

On top of that you can avoid dropping the price while paying with bitcoins, and in the same time really he'll the bitcoin market and it will not cost you anything, by the following method.

1) buy an item at the merchant using bitcoin
2) the merchant will likely instantly sell the bitcoins (automatically by bit pay), likely dropping the price slightly
3) you instantly buy back the value of the coins with dollars, the same amount of dollars that you just spent in the store
4) you haven't lost money, (maybe even made a very small gain), bitcoin gained some volume (1 sell from the store, 1 buy from you) and you still have the same amount of bitcoins. And the merchant received a bitcoin transaction, which makes them notice people actually like paying with bitcoin (so more merchant will accept it, and more users will use bitcoin once more merchants accept it)

So, it's a good thing.

the price drop was due to the FUD of china.

and as for the news that merchant adoption causing price drops. they have forgotten the crucial point. the customer adoption (buying coins) causes price rises.

for every customer buying a coin to use for retail, there is a merchant selling that same coin at a later date back to fiat. thus there is an equilibrium. not a drop.

take this last week for instance. imagine a customer buys 10 coins. the price was $400 each. the customer then looks around websites for a week and finally finds a product they want to purchase. they buy a product for $4000. which this week is 8 bitcoin (not 10btc as it would have cost the customer last week)

so now LESS bitcoin goes back to the market to give a merchant $4000. meaning the price does not tank, it rises as there is less bitcoin on the markets being sold.

so buying 10btc selling 8btc for the same exchange of fiat value between customer and retail. will help the price rise. help customers keep some wealth and for merchants, they will still get their fiat.

this....I see early adopters cashing out some bitcoins which will push price down a bit....but long term it helps spread the coins, but in any event the real $$$ are not in retail.

Yea but Peter seems to overlook the fact that the more merchants accepting Bitcoins means more people who will use/hold Bitcoins.  It's a rather backwards argument if you ask me.

Customer buys 8BTC at 500 and in a week when he's ready to shop the btc price is down to 400 he now needs to buy more btc to make his initial purchase. oops.

That doesn't sound right. Logically price should go up not down.

wrong.
if a customer buys 8BTC at 500 ($4000) and a week later the price was 400 each. a smart customer would not use his bitcoin. he would keep the bitcoin in cold store and use his fiat.. thus no bitcoins would be sold.

why would anyone be stupid enough to sell bitcoins at a loss just a week later!!!

And where would the customers first get bitcoin to pay the merchant? Oh that's right, the customer has to buy the bitcoin first. On a global scale, the amount of bitcoins that customers would have to buy, would equal the amount of bitcoins that merchants will sell.

exactly the person that bought 1BTC at $30 last year, would only need to sell 0.06btc now
meaning the customer has taken 1btc off the market, and only put 0.06 back on the market to buy a $30 item today. thus there are less bitcoins on the market, meaning demand is higher.

Because said customer just wants his console or whatever and doesn't want to turn into a btc speculator.
I was just pointing out that your argument was based on circumstantial evidence and it can go the other way around as well.
Basically what you're saying is: buy bitcoin and hope its value doesn't depreciate by the time you're ready to shop or
don't use bitcoin.

"Merchant acceptance is NEGATIVE for bitcoin"


Dont feed the trolls!

Both extremes are off here. Peter Schiff is correct in saying that if 10x more businesses accepted bitcoin today, we might have a surge of sell orders creating downward pressure. He just leaves it there, however. If the sell orders push down the price, (as other people are noting here) there are millions of bitcoin investors, some of them very wealthy, ready to pounce on purchasing opportunities. This creates serious upward pressure.

The end result?

A huge increase in volume and a stabilizing effect.

Which debunks his other notion that it is too volatile. The more merchants accept bitcoin, the more the price will stabilize for the reasons stated above.

This is why bitcoin moves slower in comparision to the rest of the alt coin market. This will only continue, imo, as the currency becomes more widely accepted. Once the market cap reaches 100 billion...i think the 10% plus or minus moving days like the one we just saw recently will struggle to max out at 3%.

Also FWIW, I think Peter Schiff's brother is smarter than Peter. I spoke with Andrew at Occupy wall st while his brother was making an ass out of himself and he was having genuine conversations with occupy people. Much cooler guy, imo.

It seems that Peter pointed a fact that nobody noticed. But as the market is manipulated, who knows.

the real secret is. when rich people find out about bitcoin, they will try any tactic they can to tempt others not to buy in.. simply so they can buy in cheaper.

many merchants that starts to receive will också start to be more interested in SPENDING btc and will have more opportunities to do so. And some of the employees will probably ask for some of the salary in btc. Eventually many people will both earn AND spend most of the salary in btc and then it gets really interesting. Then we have something that resembles a currency more than a high risk investment, something that starts to seriously compete with fiat.

This will at least longterm have a stabilizing affect and drive up the price as I gets more useful and attracts booth investors and normal users.

If a popular merchant accepts bitcoin, a lot more people will buy bitcoin for purchases. The amount of bitcoins users buy will be more than the merchant will sell after the purchase, so is a positive.

I'm actually a merchant about to start to accept Bitcoin, but expect most sells to continue to be in fiat even if I give like 10% off for btc purchases, but let's see. If I against all odds get lots of purchases in btc I will put more effort in trying to spend btc rather than just holding on to them like I do now. I really like the idea of being completely out of the loop, but might be some time before that's possible...

merchant acceptance is negative?

whoever thinks that needs to talk to overstock.com, tiger direct.com foodler.com, and the other thousands of businesses. the story appears to be a opinion of a person and not a research result from many merchant interviews. thats why i think that the person making such a remark, is some one creating FUD to get cheap coins

I dont think so. Although massive sells are the main reason for the recent drop

First it was Bitcoin doesn't work because people hoard it.

Now it's Bitcoin doesn't work because people *spend* it???

Interesting, I didn't know this.  Let's see what I can add:

Tow Woods, an anarcho-capitalist and senior fellow at the Mises Institute, regularly fills in for Peter on his show.  He's really quite interested in Bitcoin and while he reserves judgement on the technology as a whole (recognising a lack of strong historical parallels and that his own understanding is limited), he has commented on being impressed with the logic and lucidity demonstrated by various Bitcoin proponents (Erik Voorhees is his "go to guy").

---

I reject Peter's claim that greater merchant adoption will suppress the price.  It seems as though he's ignoring why people are holding bitcoins in the first place.  I find it almost impossible to justify the assumption that most people will want to reduce the dollar value of their bitcoin holdings as those bitcoins become more useful.

Just finished reading through this thread. This is the most important and concise post:

Very well said, thank you.

For more insight into the evolution and inevitable global adoption of cryptocurrency, I highly recommend watching Bitcoin the organism (https://www.youtube.com/watch?v=vaPgfErzeu0), Jeff Garzik at TEDxBinghamtonUniversity.

Also, a reading of the History of the Internet (http://en.wikipedia.org/wiki/History_of_the_Internet) wikipedia page will prove fruitful.


"Almost instant in historical terms" is what happens when a decentralized, democratic, organicly adaptive, mathematics-based solution comes along for a problem that was formerly, and poorly, addressed by some ancient, industrial-age centralized solution.

Now class, who can tell me what these all have in common?

• Pre-internet telecom networks
• Blockbuster video
• The Newspaper
• The record store

and the newest member of the list:

• Nation-state fiat currency

Let's put aside the problems of fiat inflation and hyper-inflation for now.  On your own time, study root causes of WWII, Weimar republic (http://en.wikipedia.org/wiki/Weimar_Republic). Hint: fiat hyperinflation to pay war debt.

The point is, a vast, labyrinthe system of interconnected centralized national banks is an over-engineered solution to the problem of trust. Good engineering is not what you add, it's what you remove. The blockchain's power as a technological superforce is rooted in the brilliant simplicity of the mathematics under the hood. This is Occam's razor at work.

Very simply put, cryptocurrency is a better way of doing money. I'm sorry, boys and girls, but there will be no epic battle for the fate of money. This fight was over before it even began.
We early adopters are going to drink your fiat milkshake (https://www.youtube.com/watch?v=s_hFTR6qyEo), and there's nothing anyone can do to stop it.
That's why a few of us with even tens of BTC in cold storage know we are already set for life.

For those of you paying attention, the answer is yes, you should probably divest from your nation's fiat into the safe haven of the crypto of your choice, ASAP.
This is going to be over very quickly. Dangerously quickly... Once we've got ~10% global adoption, shit will get serious. I'm talking permanent exponential growth, it could be all over in months or days.

Impossible to know when or how long, but it will happen sooner or later.


1993-2007.
1% - 97%
14 years.

Four years later, BAM! Cryptocurrency is invented.

I think most of you folks are not comprehending how short a length of time four years is, when weighed against the magnitude of the innovation that is cryptocurrency.

http://2.bp.blogspot.com/-tc8RJQno6tQ/UfHhBEVTatI/AAAAAAAAATY/maam-EUkF7I/s1600/graph.gif

The waves are getting shorter every generation. The beginning is near.

http://1.bp.blogspot.com/-3eQxugu3DKM/T8jh_u_czQI/AAAAAAAABjE/8x1viS7VFMQ/s1600/Exponential+Growth+of+Communication.png

http://www.ctetrailblazers.org/2012/06/technology-changes-everything-computers.html

I just read an article that said in South Korea 5g will be out by 2020.  It will be 1000 times faster than the 4g of the ipones and galaxies.  Well..... that is what they say anyway.  I am waiting to see, but if it does happen, then yes, cell phone internet speed will be comparable to that graph.  Just another part of the puzzle coming together for the digital revolution.  

http://khnews.kheraldm.com/view.php?ud=20131218000816&md=20131221004323_BH (http://khnews.kheraldm.com/view.php?ud=20131218000816&md=20131221004323_BH)

Everyone I know says don't buy bitcoin, but I just want to get more and more into crypto.

Vinny Lingham has a nice piece in Medium where he explores this angle

Yes, that's right. Also there was a bubble.

Greater merchant acceptance just means that early adopters dust off their paper wallets and bring coins out of cold storage to spend. That increases the supply of bitcoins while demand remains constant because no one is buying bitcoins to spend when other payment methods are more convenient.

This is good for what buyers there are. These old coins are now in the hands of newer speculators/investors. The price of a bitcoin has gone down so more people can afford to put their money in.

Greater merchant adoption also means that they start mentioning bitcoin in their marketing materials so that creates awareness. That could boost prices. Will it be enough to entice consumers to use bitcoin? Not by itself but it will help. Using bitcoin needs to get easier and safer before we see greater adoption by consumers.

The actual problem is merchants are cashing BTC for bank currency immediately because they have limited use of them. When enough merchants accepts them, they'll no longer need to cash out which will be good for BTC then.

Link?

Yes, it is a net benefit because of the increased dispersal.

It will weigh on the price, temporarily, but the net effect is it makes it easier to get bitcoins into more hands because the current holders have more places to spend them, in easier ways, and willing buyers can get them at a cheaper price ...

... it is just another phase/wave in the adoption curve, nothing to get too excited about.

Actually, most merchants are using Bitpay or Coinbase, so they never touch BTC.  Bitpay and Coinbase are dumping Bitcoin and capturing juicy spreads at the same time.  I'm not sure this talking head in the OP is correct though because it doesn't matter how many merchants you have, if consumers aren't buying them to pay for stuff.  This is just current BTC holders shopping, as is evidenced by a recent poll I saw at Coindesk, that said that 75% of merchants had seen little to no growth in revenue.  Of course, people can't spend what they don't have.  

So to say merchants are adopting Bitcoin, is really inaccurate.  BitPay and Coinbase adopted Bitcoin, merchants are still using the same old fiat.  They're just riding the hype and hoping to cash in on a little bit of the money current BTC holders have.  The price keeps dropping because consumer demand to buy BTC is not there.  It's really as simple as that.  If people wanted them, they'd buy them.  Numbers don't lie.  You can blame China if you want, that only highlights the lack of consumer demand from the rest of the world.

Right. Coinbase will guarantee a Bitcoin price for a few minutes for merchants, so merchants take zero risk on Bitcoin volatility. Merchants are never in Bitcoins at all.

With 10-20% volatility in a day, few merchants want to be. Those who really are in Bitcoin are usually selling something with a huge markup.

Anyone that can think understands the obvious.

Merchant "adoption" means bitpay and coinbase. These are just exchange services, basically providing more outs for someone to sell BTC at.

Now ask yourself who has BTC and is willing to sell? Miners, those with substantial capital gains, and those few that earn BTC incomes.

Merchant adoption does nothing for the value of a BTC.

As long as BTC is exchangeable for fiat, every merchant has "adopted" it. Do merchants have to "adopt" gold for its price to rise? No.


Example.
If i sell my BTC for USD and spend at BestBuy that is the same thing as BTC-->Bitpay--->USD-->BestBuy.

Now think about that.

The only thing that matters for the BTC value to rise is an expanding pool of fiat BID.

If you own a single satoshi for even a thousandth of a second, you contribute to the demand for BTC. This tends to push the price of BTC up, or at least slow down a decline in the price.

Consider this example: if you buy oil in dollars, even if the seller converts the dollars to a different currency a thousandth of a second later, you are both contributing to the demand for dollars.

merchant acceptance implies a positive transmission of bitcoins. your post is conceptually negative by definition.

I'll go back and read it just to be sure  ;)

ok i read the post, why would market capitalization drive the price down?

Middle Eastern countries use their oil wealth to buy arms from western countries chiefly the US. They also hoard US treasuries. So most of the money flows back to the west.

Another difference is that you can't buy oil using any currency other than the US dollar. So this underwrites the US dollar. Iran tried to switch to the Euro but that has only led to sanctions.

How do total sales of goods/services in Bitcoins compare to the number of new Bitcoins created, per month?

The premise is faulty. Bitcoin's price going down is not negative for bitcoin. I'd much rather have plenty of merchants accepting bitcoin and have it valued at $1 per BTC, than almost no vendors and have it valued at $1000 per BTC.

When the first few merchants start accepting bitcoins and directly exchanges them into USD or whatever it might not boost the price. But when more and more accept it there'll be an interest amongst merchants to hold the bitcoins they have.

Short term negative. Long term positive.

Why?

Yes the merchants for the most part sell the bitcoin right away. That is the short term negative.

But the more merchants there are, the more reason there will be for people to hold bitcoin. Right now it is just speculation or enthusiasts. But when people understand that bitcoin is widely accepted, they'll accept bitcoin in trade and hang on to it until they need to buy something. That's the positive.

Long term a fraction of a bitcoin (or more) being held by each of a few billion people is worth more than whether overstock.com holds on to their 2000 bitcoin or sells it today.

Good read

Bitcoin is a forgone conclusion at this point, and even if not bitcoin, crypto currency being the dominant medium of exchange. Fiat by central govs simply cannot compete on any level.

Central Govs are so inefficient its hard to know where to start. The reason being [the power to] tax. This power and enforcing it, makes the preservation of self the central function of Govt under layered under the guise of much on the doctrine of public good, eg roads schools/education, police force etc.

The power to tax is dealt a near fatal blow by BTC as tax jurisdiction and legal jurisdictions will be arbitraged to near zero by almost instant capital flight of Cryptos.

But this is not the most powerful aspect of cryptos. Rather Crypto's allow niche provision of goods services in a mass production way, further there is no off or on for the Bitcoin "work force". The economies of scale achieved by are far more nuance, powerful and encompassing that the crude budget, interest rate, bond issuance, QE, etc etc. Fiat simply can't compete with the ways BTC can flow in and out of opportunity. If you remember the last scene in the first total recall movie, the current economy is like us dying out on mars with nothing breathe or in the subsections of society where they can turn the air of at will. BTC has just given air to everyone, en~masse.

The path to uptake may face serious resistance. Yes the internet took media which is powerful, but it not he same as money. Money is power, by tax and qe, and those in power [not you] are not only accustomed to it but that's their only conduit to means to live, that's all they can do. Fortunately the war was over before the first shot was fired becuase ... maths. No amount of power changes maths. Crypto is maths.

I think there may be something to this. He's referring to the velocity of bitcoin, which I've seen surprisingly little discussion of around here (I guess not everyone is an economist, eh?) (Nor am I, but I dabble in it.)

A higher velocity effectively increases the effective money supply of bitcoin just as if there were more bitcoins. Some of the previous posters here are wrong in imagining that it would have no effect. It is a mundane phenomena in economics and the effect is well known. If you wanted the price of bitcoin to skyrocket, convince most people with bitcoins to simply hold them and just let people fight for the remaining few being offered for sale. Doing the opposite - flooding the market with a high volume of bitcoin sales - effectively depresses the price. So I think that is part of the reason for the decline the past few months, albeit a minor one at this point.