Bitcoin Forum

Whoever started this recession: Thanks!

It's way easier to make money buying cheap BTCs and sell them at higher prices than it is setting up new rigs. I don't even have to leave the desk!

There is also the nice side effect of lowering the difficulty. It's like a stock exchange, buy cheap, sell at high price and become rich only that it is way cheaper, easier and less restrictive than on a real stock market. It feels like an easy computer game.

I don't even have to add to this, because all the inexperienced people here are overly nervous and paranoid. So it is a great chance for people who have been using BC for a while now (and like me sold them at a low price, because they have been paranoid about the graphs) to use their experience and become rich.

Also, is the bottom reached? I want to invest even more money, but not at once, so I have been splitting it up to lower levels. Half of it has already been used, but this price drop doesn't appear to be over now.  Is there a good reading on this topic or some common practices on how low the buy-price should be?

I read some stuff, but I'm not sure about Bitcoin, because there are quite a few factors which aren't relevant when it comes to the Bitcoin market.

Oh and don't worry! I am not that rich, so I won't be able to buy everything. There are lots of inexperienced kids, so I think there should be enough cheap Bitcoins for all of us.

EDIT: To all others. Please don't destroy it! Don't offer too much money. I know you can make loads of it if you are fast, but we can keep this low prices for a bit longer!

The golden rule for making money: Rely on the stupidity of the masses, it will always pay off!

I just want to point out that the exchange of btc-usd going down is not a recession, its just the exchange of btc-usd going down. Prices change, its normal and positive, not a recession.

Looking at http://bitcoincharts.com/markets/, the estimated next difficulty level is going up, not down.  It was 720,000 a couple of days ago when BTCs were worth almost $30.  Now it's 791,000 with BTC at $22.  The value of each BTC is likely to follow the difficulty curve, but there is absolutely no certainty that this has to be the case.  Just because it has in the past, doesn't mean it will do so in the future.  Everyone is aware of this fact, and should logically be hoarding BTC until they're worth many hundreds of dollars each (possibly thousands).

Is that likely to ever happen?  I wager it will not.  There are far too many existing BTC users who purchased their BTCs at less than a dollar each, or generated dozens per day last year.  These users will sell up.  How many investments yield 100x returns within a few months and are not a scam?

I think Bitcoins can be compared with gold, because gold is mainly used for training and mining gets harder, because it is finite and the density is lowering. That's why I opened another thread (http://forum.bitcoin.org/index.php?topic=14986.0) to compare it with gold. Price drops usually appear after peaks. That's what peaks are all about. What we see here for this reason is just a peak we reached.

ok i had to register for this. its getting old people comparing BTC to gold. wtf? gold is traded based on its "value" and its "value" is derived from something physical. it makes great jewelry and decoration. that has always been its value, since the beginning. it makes a half decent conductor as well, but aside from that its value=people's desire for jewelry.

saying BTC is like gold is saying BTC is for decoration only. do you get a stiffy when you see your large wallet? no. you intend to spend your BTC for either A)currency exchange or B)goods and services.

the big spike in BTC was due to people wanting to exchange them for goods/services (see gawker article lol ) people are currently realizing that its a bit more difficult than expected. also, plenty of people seeing the spike have obviously invested as well.

honestly, if BTC is to REMAIN viable and hold a "value" it has to be accepted for goods/services or be exchanged. people are not going to keep trading it if it holds no real use outside of an exchange.

imagine if amazon started accepting BTC. what would the "value" be? plenty more than it is now. that is going to be the long haul. waiting for good penetration into the useful market. not trading it "because its like gold".

and please, dont go on to say that "BTC will hold value because mining costs $$$ in electricity and is difficult". this will only keep the miners from selling at a huge loss IF the currency is still a viable currency. if nobody accepts BTC for any transaction, and someone is willing to exchange their USD for their "useless" BTC, the smart cookies will cut their losses early.

Another question is how merchants are supposed to offer goods and services denominated in BTC when the exchange rate to USD$ swings so wildly.  A few days ago someone was offering a 1989 BMW for 100BTC on this forum.  They would have got US$3000 back then, but only US$2100 today.  Do we expect merchants to adjust their prices daily?  What if the exchange rate swings so widely that the product's price is lower than its cost to the merchant?  That may happen over a period of months with a government backed currency (extreme examples omitted), but in only a matter of hours with BTC.

I believe in the long run the swings will be lower. But either way any merchant can do what many farmers do in RL: sell short futures/options, in the case of BTC that would be sell short long term options on BTC.

just tonight i seen a guy on "pawn stars" sell his 31 lincoln (believe it was a 31) for about 95kUSD then bought gold (because he was not legally able to sell the car for gold). gold has been going UP in price as the dollar has been going down.

but aside from that, the value of the USD fluctuates often. why then do people allow you to pay your rent with USD?

in an ideal and usable market, BTC will remain steady with hopefully (and likely) a small increase in value over time. if you ask me, i would consider the gawker article, and all the ensuing popularity of BTC after that, as BTC's "IPO". its not uncommon for a stock to vary wildly after its IPO.

when i see that graph, i turn it upside down in my head and change the title to "USD Value"
if gold were useless, we may as well trade pictures of UFO's.
gold's usefulness secures its value.
if gold is expensive, your currency is cheap.

gold has seen such a large, out of line with inflation, rise not just due to our cheap USD but has been compounded by people's faith that gold is a more secure investment. gold's usefulness remains pretty constant, which is one reason people like it. it has a use, and the demand for the things it's used for doesnt vary wildly.

[SARCASM]Yeah, I know people and banks decorate their safes with gold bars in them and of course gold is just that expensive, because it looks nice.  ::)

And of course it is not because it is a hard to get, limited resource that people therefor trust[/SARCASM]

I know it is used for lots of stuff, like jewelery and electronics. It's just that's its still mostly used as a store of value, even in form of jewelery. It's in peoples safes most of the time. You've got a few grams (at most) of it in electronics and decorative stuff. In most jewelery it isn't pure gold anyway. Also gold on it's  looking that nice. which is a highly subjective anyways, so nothing to justify the price. It also isn't as important as it was a long time ago, when it was maybe the most important status symbol. These days you aren't looking like an important person, because you wear gold.

I know the comparison isn't perfect, but I think it is at least as good as the comparison with a regular currency is. It is limited and it becomes harder to get. It can be used for stuff like Namecoin and maybe someone finds a way to make it look aesthetic.

Then you're admitting that it has absolutely nothing to do with the demand for jewelry.

As already stated, gold is intrinsically worth only a fraction of a fraction of what its current value is.  It's all speculation.  People are pulled to it not because it has any real intrinsic worth, but because of it's magical appeal as the "real" currency.  This comes from its history of being wanted and used as currency, which has now falsely lead the ignorant masses to believe that it has high intrinsic value.  In a true SHTF scenario, gold will be worthless - you cannot eat it, drink it, hunt with it, or defend yourself with it.

i agree, it is mostly used as a representation of value.
if people stopped buying gold rings tomorrow, and threw them all away in the garbage. would you be digging through the trash to get those pretty rocks? i wouldn't. because nobody would want them, thus they are worthless.

if people have no use for an object, it is worthless. else rare, hard to get, useless objects would be valuable. kind of like pictures of UFO's.

I think you are wrong.

First of all, bitcoins are physical too. Electric and magnetic fields are physical.

Second, the current valuation of gold is far far away from its utility as conductor or jewlery. The current price of gold is only explained by its monetary use. If gold stopped being used as money its price would probably drop by more than 90%. Is that so different from bitcoins? Yes if bitcoins stopped being money its value would drop 100%, but if you loose 90+% of your wealth its still a fucking disaster. So not so different gold from bitcoins.

The fact that originally gold started being used as money because people valued it as jewlery, and bitcoin was orignally valued by enterpreneurs with a vission is quite meaningless. Both gold and bitcons had an original value.


You are 100% correct in this one and it is very important for the Bitcoin community to start promotng itcons around merchants.


100% correct again.

BTC is physical like gold, but has less real world use.

gold's value in jewelry is two-fold. it's pretty, and has always fascinated humans, and it is valuable. currently BTC is not that fascinating to look at, or rather to spend for goods or services, but it is value.

though i do not think the current price of BTC reflects its real world value.
i also think that if BTC were able to be spent at various large online outlets, then its current value is FAR under what it would be.


also, the price of gold is 100% on par with the market demand for jewelry. buying gold jewelry is no different than buying gold bars. typically you pay MORE for a gold ring, even. if the price of gold was not in line with the price of gold jewelry, then id be buying cheap ass gold rings, melting them down, and selling it for more USD. sorry if i didnt make myself clear, but i did not mean the price of gold is directly related to the jewelry and conductor market. but those things sustain the objects viability.

We kind of agree, but I dont think gold as jewlery sustains gold at these prices. Its monetary use is what sustains gold. Do you really believe that a drop of 90+% of its price would really not be a big deal? The real advantage of gold in this issue against bitcoin is centuries and centuries of tradition.

^You hit the nail on the head.  It's tradition and historical demand (based on absolutely nothing, really) that drive gold these days.

Gold is no more useful than the USD or any other fiat currency.  In fact, at least you burn dollars to stay warm and cook food.  You can't even do that with gold.



Allow me to bitch slap you with facts...


As gold price has soared through the roof, demand for gold in jewelry use has been on a steady decline:


http://goldratefortoday.org/wp-content/uploads/2011/04/gold-demand.png


And that's even using a chart from an ultra-biased gold pumping site.  Actual speculative demand for non-physical gold is what's driving the price though the roof.

No. Gold is useful as money. Its a very important role to play, because money is essential to coordinate the production of people that dont even know each other and allows human progress. How is that not important? How is that "based on nothing"?

Gold has some nice qualities that make it suitable for money. That is a very important role. And so does Bitcoin.


And you are wrong again. Your chart proves that people is using gold as money, and it makes sense since the governments and their banking cartels are trying to pay off their unpayable debts by printing the pieces of paper (or electronic accounts) that they force us to use as money.

Because the value of gold is based on the fact that people think it's valuable, nothing more.  It has some small, declining value for use in jewelry, and miniscule value for use in industrial applications, but otherwise, the majority of it's value is based solely on the fact that people assign it that value.  This is not different than any fiat currency.  The value of the USD is not based on anything intrinsic, but simply on the fact that people assign it a value.

Can't understand that?  Think of a true SHTF situtation.  You're shipwrecked on a deserted island.  How valuable is your gold then?  Do you think people are going to sell you their food or weapons for gold?  Of course not.


You can make anything into a currency, and Bitcoin is proof of this.  Gold makes no better of a currency than iron, rocks, ivory, toe nail clippings, etc.  Anything with a finite supply (which is everything) that doesn't decompose quickly can be used as a currency.  People have simply gravitated to gold historically (because "oooohh shiny" back in the caveman days), and it has maintained that appeal until this day because that's how it's always been.

False.

I've posted this before and will post it again... "It's extremely important to understand why gold is valuable if one is to understand why Bitcoin may be even better. Gold's value comes from its physical properties - it's divisibility, durability, homogeneity, scarcity, etc.  Think of all things out there in nature... few offer all the same attributes as gold. Iron is divisible and durable, but it's not scarce enough. Wooden sticks are divisible, but not able to be recombined. Food can be used as money, but it spoils when saved and two pounds of food are not identical - not homogeneous. Cows make a poor money because dividing one in half would kill it. Gold, and other precious metals, are the only things mankind has found that work extremely well as a money. Anything CAN be used as a money, but some things are much better than others for this purpose. We use fiat paper now, of course, only because governments backed with violence and guns have forced us to do so."

The value of gold is based on the fact that it's properties make it useful as money. Not because everyone just "arbitrarily" assigns value to it.

A Real Gold Mine?
Principally used in jewelry, gold (chemical symbol Au) is also used generally in manufacturing (and by the electronics and computer industries in particular) due to its excellent thermal and electrical conductivity, resistance to oxidation, and inalterability. The computer industry uses several hundred tons (318 tons in 2003, for example) of the element every year.
The precious metal is found in almost all computer components--processors, motherboards, extension cards, memory...

- From http://www.tomshardware.com/picturestory/550-gold-motherboard-chemistry.html

318 * 2000 * 16 * ~$1500 > $15B/yr.

And so does the value of a chair, and so does the value of a shirt, and so does the value of a car, and so does the value of a tv, and so does the value of a plain, ... Value is subjective, its Economics 101.


No, you are terribly wrong. ALL of gold value is because people asign it that value. Just like happens with anything else. Value is subjective.

People value things because of different reasons (and the task of economics is to analize not to judge. Judging is the task of moral/politics). Some people value gold for jewlery and some other value gold for money. And the main use is money. Those are the facts. In my subjective opinion the use of gold as money is far more valuable and benefitial to humans than its use as jewlery, but that is just my subjective opinion. You can have your subjective opinion, but it should not blind you when you are analizing the world.


I dont want to think you are being deliberately dishonest. Fiat money is not based on faith or trust or that "people asign it a value" (and nothing has intrinsic value, value is subjective). Fiat money is imposed using force by governments. Thats the reason why people use them, its not their own voluntary decission.


What am I supposed to understand?


You just discover value is subjective. Congratulations.


Actually no. Bitcoin was designed in a very clever way to have the characteristics that good money has, but for the internet.

You can theoretically use anything as money, but some objects make very good money while others make very bad money (with a full scale in the middle). This is why some things get selected as money (like gold) and others dont (like perishable food f.e.).


Actually it does. And that is the reason why it was choosed by different cultures around the world that never knew each other. Ill let you investigate what this characteristics are.


Which is completely fine. Being money is a important and useful role to play.

It's a little silly comparing gold with bitcoins.  2000 years ago gold was highly valuable.  It is highly valuable today, and will probably remain so in another 2000 years.  It works without electricity, computers, and is universally understood by pretty much every culture.  It has stood the test of time. 

I went out on Saturday night with BTC valued at 21.  Coming home, it's down to 17.5, and it was 31 a few days ago.  That's one heck of a correction.

Fiat money is highly divisible, very durable, completely homogenious, and as scarce as the controlling body wants to make it.  In fact, it's specifically made to be all these things.  Yet you hate it.  Explain the inconsistency.

Value is subject, but there are certain items that will always retain value regardless of market conditions and personal taste, this is called intrinsic value.  Gold is not one of these items.  Food, water, shelter, and clothing, and anything useful in procuring those items have real intrinsic value.

You can't seem to understand the difference between a commodity (an end in itself) and a store of value (a means to an end).  Gold's small percentage of commodity value only applies during good economic times and with the presence modern industry.

Value is subjective and you dont know what will retain value because it depends on people's future valuation. You can speculate about it all you want. Intrinsic value does not exist.

EDIT: But let me explain you what you are trying to do: You are judging some valuations over others. You think that people valuing a car for transport is better than peole valuing gold as money. But your subjective valuation is not science, its only your subjective valuation that its blinding you. We could argue all the day about what adds more value the transport that a car provides or the economic coordination that gold as money provides... but you know what? our subjective opinion does not matter when its time to analize how the economy works. The fact of the matter is that it happens that way. We value a car and we value gold. And each person asign it a subjective value given their situation and their knowledge. You are implicitely deciding that you are superior to the rest and can decide that one is better than the other. You are not better than te rest of us. Peopel have their reasons to value gold as money. If you dont, fine, don use it. But it does not matter when it comes to analizing the economy.

I'm not speculating.  Without food, water, and shelter, people die.  That makes those items intrinsically valuable.  Any items directly connected to those items, like guns, ammo, tools, etc. will always have value as well.  There's no speculation involved in that.

The value of gold is not obtained from its use in computers / electronics at all. It is not not an industrial metal like silver. Gold's percentage of use in industry is about 5% of the mined supply. Gold is really only used as an investment/ hedge against inflation. And its only gone parabolic in the last 10 years because the dollar's debt has gone parabolic as well. Gold relies on a weak dollar for it's value. If you ever hold a piece of 24kt gold you will know why bitcoins can never be as good as gold/platinum/silver in the long run. There's nothing tangible to hold onto with bitcoins. While that may not stop its increase in value over the next few months, to compare it to gold is foolish at best.

Without good money to properly coordinate the production people die. There is no sspeculation involved in that.

As I said you are imposing your subjective valuation onto your economic analisys. Value is subjective. Something useful as food might be more valued in some situation and less in others. And something useful as money might be more valued in some situation and less in others. Stop trying to impose your subjective valuation as "the truth".

Oil is a better comparison than gold anyways.

High prices create new supply. Look at a historical chart of oil prices going back to the 1800s. When the price gets high in real terms, exploration is funded and new supply comes online.

High BTC price causes people to hear about BTC, and start mining.

Also, some will expect mining difficulty to drop because of the BTC exchange market price drop.

I don't.

Again, it's like oil.

You bought the rig. You either have payments to make on the rig, or you have a paid off rig.

Either way, the sunk costs have nothing to do with your decision whether to keep mining or stop mining. You can't stop mining just because of the price drop. You would only stop mining if the variable cost of mining became higher than the expected return on mining.

You might stop selling BTC for a while if you have a paid off rig but you won't stop mining. If you are counting on BTC sales to make payments on your rig, then your smart move is to keep selling BTC. Even when it gets very cheap, it still helps at least offset the cash out on the payment while you try to sell the card.

In other words, you don't stop until you literally don't make any profit at all based on your power bill. Or, if you were a bit more savvy, you might also consider the depreciation on your video card etc. That just means you'd stop a little bit sooner, at a slightly higher BTC price than somebody who was only considering their power bill.

Oil prices are like this...while there is always talk of a new paradigm, and a new paradigm is always possible, looking back over the past ~170 years you see that there has often been talk of a new paradigm and one never showed up. To the extent that there were new paradigms, it was new paradigms of supply as much as new paradigms of demand.

As oil prices move higher, they eventually cause businesses to fail. This creates less demand for oil. It's called 'demand destruction.' Eventually, what you have is a lot of supply compared to weak demand and the price plummets.

The price plummets because oil producing countries overextend themselves. That's exactly like miners who bought a bunch of high end cards on credit. They are like a Venezuela. When the oil price goes way up, Venezuela spends more and more money.They can't afford to stop pumping. The Saudi's have been the smarties in the game for a loooong time now. They understand that oil goes up and oil goes down.

The Saudis shut down production when there are large price drops and wait for the price to go back up. When prices are high, the Saudis want OPEC to agree to production increases, like has been going on lately. Currently, countries like Venezuela do not want OPEC to increase oil production. They want the highest possible prices because they are dependent on those prices. It's not sustainable, but they are short sighted crooks.

The Saudi's are so much smarter. They understand that if there is not some relief on market prices, a high oil price will cause demand destruction.  They know it takes some time, months really, to get going, but they know it will happen. So they want to increase production to halt the upward price momentum and possibly even drop the price back a bit for a while. This will give businesses time to make adjustments and will result in less demand destruction. It will (hopefully) prevent a 'overheating' of the thermometer...or a 'overblowing' of a bubble or however you want to put it.

So while I'd expect a low BTC market price might discourage some of the 'little guys' from mining, it will not stop the people who bought hardware...until it gets so bad that you see them selling that hardware.

And of course as they say, oil is like a drug that the world is addicted to.

You obviously don't have a clue what you're talking about.  Have you ever heard of a barter system?  Money is absolutely not necessary to sustain life.  You're grasping at those straws pretty hard.


Try to understand this:

-Currency is a means to an end, not an end in itself.  It's only value is derived from its ability to be converted into commodities.

-Commodities are an end in the themselves.  They are intrinsically valuable because of this.


Gold is primarily a currency, it is not a commodity.

You need to learn economics and stop ashaming yourself. Value is subjective, nothing has intrincsic value. This is Economics 101. Im done here.

I have a degree in Econ.  ::)

Items that sustain life have intrinsic value in this world.  Their relative values will change, but they'll never be worthless because they're necessary to keep people alive.  Gold and every other item that's used to store value is not necessary for sustaining life and can easily turn worthless if people decide they don't want to use it anymore.  People can't just decide they don't want to eat food anymore, therefore it is intrinsitcally valuable.

Troll.

I liked the part where you thought something still priced at > 2000% price increase within 12 weeks was cheap.

I also liked where you quoted relying on the stupidity of the masses after stating quite clearly that your market understanding is restricted to a constant computer game like loop of the same price behavior.

Yes they can. They'll die because of it, but they can. Most people however value not dying. Just like Most people value gold.

Commodities are NOT an end in themselves. Not starving is the end, eating is the means.

Trying to explain actual reality to the majority of this forum ends up in one being exhausted, misunderstood.

It's kind of sad, but maybe it helps if you know that at least one other person knows about the real outside world, too.

AyeYo is spot on. Economic theory might be 99% silly esoterics, but the first 1% of it's core understandings and foundation are simply matters of fact. The above statements are just that.

Intrinsic value is part of the subjective theory framework, not the other way around.

Things in nature don't have an inherent value unless a human thinks it's useful.

Lol how much do you pay for the air you breath? How much do you pay for gravity?

Obviously you don't understand the concept of value.  Value has nothing to do with payments and money.


Ponder this to help you understand it:  I'll give you a choice between ten tons of gold or breathable air.  Which would you rather have?

How about one-thousand tons of gold or breathable air?  One-million tons of gold or breathable air?  How much gold do I have to give you for your to give up breathing?

Lack of spectrum caused this. Spreading your bets is what brings it back.

When I see someone wearing lots of gold I dont think they are important, I think they are a pimp.

 :)

It's certainly a good time right now to be holding Bitcoins :)

Sorry, you're wrong.

Zimbabwe - Bread for Gold (http://www.youtube.com/watch?v=7ubJp6rmUYM)

Ugggh!  I thought it would get down to 3 or so.  I waited too long, and missed the train.  Oh well.  There'll be plenty more crashes in our future.

::) You're conflating value with utility. "Obviously."

Value is for things with numerical values. Even in the world of economics, the 'theory of value' is about attempting to "explain the exchange value or price of goods and services." (quoting the wiki 'theory of value').

One sort of utility of air for humans is its breath-ability.

In the case of gold, what is being talked about in this thread a lot is the difference between its industrial utility and its investment utility, and/or its closely related utility as a store of value.

It is a store of value because you can trade it for a cash price, and it is a good store of value because historically, it's generally not going to lose value i.e. demand a much lower price than what you would expect, based on what you've paid for it. To say that gold is a poor store of value because there are some notorious examples of when it failed to hold its value would require you to also define everything else as a poor store of value, if you wanted to be consistent.

Remedy the ways in which your 'gotcha' example is so ridiculous as an exchange and it should get you on the right track. How for example, would you propose to deprive me of air, if you gave me the 1000 tons of gold you offered? You couldn't. Your example is meaningless because it's not an exchange that can be made. I can't give you all the air I could possibly breath and thus can't enforce the basic terms of the deal. It's not even mine to give.

You also don't have the power to offer 1 million tons of gold, not even in theory. ~165,000 tons is all the gold that has ever been mined.

My points.

___________________________________


Your head.



I guess in your alternate universe, nothing had value before currency was invented.

If I sell your sister a Hello Kitty stuffed animal for a blow job.... then what's the numerical value of a Hello Kitty stuffed animal in that transaction?  See, you overlooked part the very line you quoted:

"Said another way, value is how much a desired object or condition is worth relative to other objects or conditions. Economic values are expressed as "how much" of one desirable condition or commodity will, or would be given up in exchange for some other desired condition or commodity" - wiki

Currency has nothing to do with it.  If I can get a cow for a barrel of oil, then the value of a cow is one barrel of oil.  If I swap my place on the right side of the fence for someone else's place on the left side of the fence, then the value of a place on the right side of the fence is a place on the left side of the fence.  You didn't pay anything for your right arm, but that doesn't mean it isn't valuable.

Therefore, I don't need to pay anything in the form of currency for the air I breath for that air to have value.  No one controls air so no one can charge for it, but it very much still has value.  In fact, the air has extremely high value because nearly any person interested in living would give up anything and everything to maintain that supply of air.  The same goes for food, water, and anything else necessary to sustain life.  Those items have real intrinsic value because they are absolutely necessary to stay alive.  Gold has no such intrinsic value because when the industries that use it cease to exist, it ceases to have value as a commodity.  When people decide to not recognize it as a medium of exchange, it no longer has value as a currency, because it's value as a currency/store of value (which makes up nearly all of its current value) is entirely subjective.

Value to the buyer is the willingness to pay (WTP) and value to the seller is the willingness to accept (WTA).

Thats the objective definition everyone should use.