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Bitcoin => Bitcoin Discussion => Topic started by: Andrew Vorobyov on April 17, 2011, 06:42:15 PM



Title: Will 1BTC >= 1USD? I doubt it
Post by: Andrew Vorobyov on April 17, 2011, 06:42:15 PM
Imagine you are buying books at Amazon and it says.

Total to pay: $50USD or 50BTC? If 1BTC > 1USD you will choose to pay $50, correct?

Variant B:

Total to pay: $50USD or 25BTC? 

It means that 1 BTC = 2 USD but how can it be? There must be something

1) that you can buy only with BTC
2) is scarce
3) is in big demand by millions ( to provide smooth exchange rate)

Point me where I'm wrong...

PS. Bitcoin idea is simply amazing!


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: LMGTFY on April 17, 2011, 06:48:51 PM
Imagine you are buying books at Amazon and it says.

Total to pay: $50USD or 50BTC? If 1BTC > 1USD you will choose to pay $50, correct?

Variant B:

Total to pay: $50USD or 25BTC? 

It means that 1 BTC = 2 USD but how can it be? There must be something

1) that you can buy only with BTC
2) is scarce
3) is in big demand by millions ( to provide smooth exchange rate)

Point me where I'm wrong...

PS. Bitcoin idea is simply amazing!
I'm not sure I agree with the logic behind scenario B. Two USD is currently worth around one GBP (roughly...) - that doesn't mean that there's anything you can only buy with GBP, that's scarce or in big demand.

In both scenarios, BTC is only worth $1 or $2 because Amazon say that what's they consider 1 BTC to be worth, and a customer accepts that. Amazon might use a figure that differs from the exchange rate for several reasons, just like some shops charge less for cash and debit cards, compared to credit cards and cheques. Shops selling in multiple currencies often buy currency in advance, or use "futures" to hedge against exchange rate changes - Amazon might do that, too, in these (hypothetical) scenarios.


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: Andrew Vorobyov on April 17, 2011, 07:05:39 PM
I mean there must be SOMETHING priced in BTC ONLY to make price of BTC to go up..

otherwise it will always be a chance to buy it using different currency thus making BTC useless above certain exchange price with major currencies.


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: LMGTFY on April 17, 2011, 08:25:17 PM
I mean there must be SOMETHING priced in BTC ONLY to make price of BTC to go up..

otherwise it will always be a chance to buy it using different currency thus making BTC useless above certain exchange price with major currencies.
To be honest, that's exactly what I thought you were suggesting last time. I still don't understand why you feel this will occur. Could you give an example?


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: fabianhjr on April 17, 2011, 08:30:07 PM
http://www.eswynn.com/2011/04/world-of-good.html (http://www.eswynn.com/2011/04/world-of-good.html) You can only buy it with BTC.


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: Andrew Vorobyov on April 17, 2011, 08:39:39 PM
Ok. let's try this way..

Given:
I love milk and bread. There are two shops on the street that sell standard milk+bread package. I have $100. There is a guy that sells 1BTC=1USD.


1st of January:

Shop A sells it for $5. Shop B sells it for 5 BTC. Final - I buy it from Shop A cause I have USD in my pockets.

7th of January:

Shop A sells it for $5. Shop B sells it for 4 BTC. Final - I buy it from Shop B cause I changed my 4 USD to 4 BTC and saved 1USD.

14th of January:

Shop A sells it for $5. Shop B sells it for 6 BTC. Final - I buy it from Shop A cause its cheaper.



Can you comment on this post please?


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: tomcollins on April 17, 2011, 08:40:34 PM
I mean there must be SOMETHING priced in BTC ONLY to make price of BTC to go up..

otherwise it will always be a chance to buy it using different currency thus making BTC useless above certain exchange price with major currencies.

People will spend BTC if they have them if they would need to convert to another currency and the cost is more.

People will buy BTC if there is sufficient discount to overcome exchange fees, or there are no other options.


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: LMGTFY on April 17, 2011, 08:45:53 PM
Ok. let's try this way..

Given:
I love milk and bread. There are two shops on the street that sell standard milk+bread package. I have $100. There is a guy that sells 1BTC=1USD.


1st of January:

Shop A sells it for $5. Shop B sells it for 5 BTC. Final - I buy it from Shop A cause I have USD in my pockets.

7th of January:

Shop A sells it for $5. Shop B sells it for 4 BTC. Final - I buy it from Shop B cause I changed my 4 USD to 4 BTC and saved 1USD.

14th of January:

Shop A sells it for $5. Shop B sells it for 6 BTC. Final - I buy it from Shop A cause its cheaper.



Can you comment on this post please?
No, still not getting it. I agree with all the three decisions above, but I don't see how that leads you to think that a currency can only go up above a certain point if there's a product that's only available in that currency.


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: Andrew Vorobyov on April 17, 2011, 09:06:30 PM
I can get along now without BitCoin currency by using other ones.

But if you will start selling love in BitCoins only - I bet exchange rate for it will skyrocket and the Beatles will need to change "Money can't buy me love"....

Until this happens - BitCoins will be just another e-currency.

I don't mean it would not be used - it will be if a lot of people would be eager to buy/sell it for services.

But I don't understand why it will grow in value?


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: infra172 on April 17, 2011, 09:17:28 PM
I think the problem you're having is that you think the value of the dollar is static.  It's not.

The U.S. dollar is experiencing inflation. The government denies this but everyone who buys bread or gasoline knows its true. As the federal reserve prints more and more dollars, the dollar is worth less and less, and 1 Bitcoin will be worth more and more in terms of dollars.  

Take a look at the charts http://bitcoincharts.com/charts/mtgoxUSD#rg180zvztgSzm1g10zm2g25 (http://bitcoincharts.com/charts/mtgoxUSD#rg180zvztgSzm1g10zm2g25) and http://gasbuddy.com/gb_retail_price_chart.aspx (http://gasbuddy.com/gb_retail_price_chart.aspx).  Notice the jumps in February and now in April occurring at about the same time. Bitcoin may be gradually increasing in value but its current price is more a reflection of inflation in the U.S.

So, more than anything else, Bitcoin, like gold or silver, is a way to hold onto the value of your money.





Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: LMGTFY on April 17, 2011, 09:21:07 PM
I can get along now without BitCoin currency by using other ones.

But if you will start selling love in BitCoins only - I bet exchange rate for it will skyrocket and the Beatles will need to change "Money can't buy me love"....

Until this happens - BitCoins will be just another e-currency.

I don't mean it would not be used - it will be if a lot of people would be eager to buy/sell it for services.

But I don't understand why it will grow in value?
OK, I've caught up! Thanks for bearing with me.

Broadly, you're quite right. A recurring theme here is that we need to build the economy by providing more and more services - either bitcoin-only or by convincing existing shops to accept bitcoins as well as whatever currency/ies they currently accept.

However, bitcoin does have some advantages that other e-currencies and traditional currencies lack. It's comparatively fast - it can take several days to send funds in a conventional currency from one bank to another in my country (the UK), whereas international bitcoin transfers are nearly instant (I'd expect it to take an hour or so for any transfers of bitcoins).

A subtle but major advantage is that there is ultimately a fixed and limited supply of bitcoins. With a traditional currency (say, US dollars) the supply of currency can be expanded, devaluing existing holdings. With e-currencies that are pegged to a traditional currency this is true, too. With bitcoins there's a diminishing supply: every 10 minutes or so another 50 bitcoins enter the money supply, for the next few years. Then it's 25 bitcoins every 10 minutes, then... until, once 21 million bitcoins are circulating, the supply stops increasing. That's a large factor in why bitcoins grow in value (relative to other currencies) - because the number is limited, and the supply of other currencies is generally assumed to increase every so often (devaluing those currencies).

Finally: we all expect bitcoins to grow in value. But that's a long term bet. Recently we've seen a few months where bitcoin fell against the dollar fairly consistently. It's picked up now, but don't regard anything I say as investment advice!


Title: Re: Will 1BTC >= 1USD? I doubt it
Post by: Andrew Vorobyov on April 17, 2011, 09:23:30 PM
infra172, It's more comfortable explanation...

ANYWAY, let's put some value into the system, add liquidity and it will catch on...

There are tons!!! of advantages for this to become substitution for current money system (IMHO)...

If 10% of the world will use it - other 90% will follow...