Bitcoin Forum

Tired to see only spammy mega-threads in the section that's why I'll try to start a normal one with this question.

If you think about it, the price is reflection of the bitcoin supply and demand based only on the available exchanges.
You can directly trade at whatever price you like.
What can be done?

Would't be better if the price reflects the real effort to "create" (mine) the bitcoin, or the effort to support the network like the electricity costs + hardware investments etc.

I know this is almost impossible to accurately calculate it but still it will be closer to the real value than to the speculative one "controlled" by the exchanges.

This is innovative technology and is should not relay only on the "old traditions" of price forming, we need a new revolutionary way to balance it, this is the only way to be world-wide accepted.
 
The whole idea of bitcoin is to be decentralize, but you have enough amount of bitcoins the price can easily be controlled.
We have seen already many such cases, and there are more to come.

What you think?

P.S. This is self-moderated thread, I will remove any comments that I suspect to be just a sig.spam*. If you not agree with this condition, better don't post here.

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*NB!: This is a self-moderated thread with the sole purpose of removing spam generated in this section. No comments will be ever deleted by me based on whether I agree with a opinion or not.

It is. But, sadly, I`ve come to think that also old ways of living are infecting bitcoin by now. I mean: regarding mining, you need a really powerful computer to be able to resolve a hash and take a piece of the cake. To have one of these computers implies a lot of money, so: can bitcoin become exclusive for those with money, with real one?
Regarding the new way to balance it, I`ve been concerned about the use of the network. Speaking about Bitcoin, more and more exchanges seems to be implementing the KYC nightmare. Do you think that by centralizing the use of bitcoin it will continue being anonymous? If the use, if the necessary means to obtain some of the common people, for instance, to buy some bitcoins is under the same laws of a banking system, then what is going o happen with the initial idea.

That`s why I think you're right: we need a new way. Bitcoin is a new kind of "money", a completely revolutionary economic system so we need different and new approaches to avoid it to become another centralized-asset, and, only by doing so, we will be able to have a truly decentralized economic system.
 

Maybe the shitposters will remain far from this one, due to the self-moderation stuff. Or not. Let wait and see.

Good thread, hope it leads towards an interesting discussion.

Exchanges don't control the price of bitcoin; people do. An exchange is just a facilitator for the buying and selling of bitcoin. Yes, there have been instances in the past where shady exchanges have tried to manipulate the prices, but for the most part, manipulation is instigated by shady individuals for whatever purpose.

On the contrary, though, the more you try to find a "revolutionary way to balance" the price, the more the conversation of centralization comes up. Is it in unfortunate that a bitcoin whale can manipulate the value of bitcoin? Absolutely. But think of it in fiat terms. A few families (the 1 percenters) that own a vast amount of fiat assets have a bunch of global power to influence decisions and manipulate markets for their own self gains. But because of the nature of the public's mass adoption of currencies, there are minute checks and balances that come into play.

Is it working? Probably not, with the rate of inflation and journey towards an imminent global economic crisis, but unfortunately, it can't be stopped. Same with Bitcoin. To try and introduce a way to neutralize the value of bitcoin is damn near impossible, if you ask me.

You can't make the price reflecting the resources needed to mine or to support the network. How would you do it when we have a different electricity price worldwide, different machines and even machines with the same specs at a different price?

Also, the supply and demand aren't what you call "an old tradition" It's a natural result, check this example.
Imagine you absolutely want to buy an Audi A6 Quattro (costing $25k) All have been sold and no more left. If I want to sell mine to you, do you think I will accept to sell it to you for $25k? Knowing I can sell it easily $30k and you will accept since you really want one. I will use the fact there isn't any Audi A6 to sell, to make an extra cash on your your back:P

This is my feelings on the whole subject as well.

It'll be pretty much impossible to have the price reflect the resources because, as you said, it will vary from place to place (even within the same country) and there are other factors that come into it such as electricity hikes and utility deregulation. It's just too random to be able to accurately control.

As for supply and demand, I don't see why anyone is surprised that this is how things are progressing with Bitcoin...especially in light of the (relatively) limited supply.

If we had really a mature, transparent market without excessive speculation, then "price finding" could approach that ideal. It could reflect maybe not the "effort" (to create BTC), but the "security level" or Bitcoin.

Image you're a millionaire, or the responsible person of a big business. Would you use Bitcoin as the main tool for your transactions?

The answer would depend on, above all, one variable: security.

You can estimate BItcoin's security - meaning that you can calculate the probability to carry out an 51% attack on the Bitcoin blockchain, that 1) could steal coins from your wallets or double-spend scam you; 2) could make the price plummet.

The lower the attack probability, the higher the motivation for the millionaire or business to buy Bitcoins and use them. So a growing security level, which is proportional to the "attack cost" (but not exactly proportional to hashrate) should create demand for Bitcoins, and so the price became correlated with attack cost.

We're far away from that ideal. The reason is mainly an immature, speculative market. There are too many unknown variables (regulation, bugs, scalability) that affect the price movements and so it will take its time to reach that "ideal Bitcoin price finding market".

Great, finally a good discussion here.

1. I'm not saying that my approach of price calculation is the best approach. It was just an example.

2.  I don't want to see the Bitcoin as an investment tool, an asset or Audi/lambo as suggested. Yeah the current situation is like this but the whole idea is not to HODL your bitcoins in a hope for the Moon or even Mars / well everyone does it, including me/ but to use them as a tool in the day life. I prefer to see it is a currency like the USD or EUR.

3.You won't buy dollars just to put them in a jar under your bed for a few years in a hope to rise their value. You gonna buy them because for example you are going to the US on vacation and you plan to spend them til the last cent.
In order this to happen to the Bitcoin too, the price has to be determined on another factor different than the ones we have today.

World of HODLers is devastating for the Bitcoin, I'm sure Satoshi won't be happy with it.

We are in the very beginning of the Crypto money and I hope that this dark period will be over soon.

Yeah I mentioned this in another post but there's a catch-22 when it comes to Bitcoin. In order for the price to go up it has to be used (spent) but when the price goes up it causes people to hold on to their Bitcoin so they can cash out for the "lambo" or whatever.

Unfortunately the original intention of Bitcoin (digital currency to disrupt the financial status quo) is going out the window with all the speculators and people who see a get-rich-quick scheme.

My hope is that one day the price will stabilize and when people see that it's not skyrocketing (or plummeting) they'll be inclined to using it more than they do now

This.

Thus far, Bitcoin's main attraction has invited mass introductions to new users due to price spikes. We've seen the little effect that current media and news has on the volatility of bitcoin as compared to years past. Imagine an ETF announcement 3 or 4 years ago, only to have the decision not approved. I feel like years ago, it would have been DEVASTATING to the price of bitcoin, much unlike the recent small dip that the price took after the ETF failed to get approval.

I honestly believe that volatility will always be the name of the game with Bitcoin until more people start utilizing it. We are still far from mass adoption, and because of that, there are individuals and institutions that are able to manipulate the price. After the recent spike in the last holiday season, I think the FOMO and shakeout was enough to change the way that people view bitcoin. The ones calling it a scam are the ones that probably won't touch it again, but I'm okay with that. Those are the types of people that were just trying to get rich quick.

All in all, I'd say that you should expect to experience volatility, which I'm okay with. Why? Because I believe that at the end of the day, Bitcoin will pave the way for the answer to our economic crisis. Fuck fiat. Digital currency is the way to go, and blockchain technology will lead that revolution.

Mark my words... There will be a time where we won't be able to buy Bitcoin with fiat currency anymore, and I believe that this will happen in my lifetime.

Unfortunately, I still don't believe there to be a tangible method to decentralize the price of bitcoin.

I agree with BTCJoe that the exchanges do not control the price. The fact that the value of BTC is calculated based on what it is bought/sold for on the exchanges makes sense. This is because you can clearly see what whas sent and what amount was paid for it by following the trade sheets. People use the exchanges for a sense of security, when converting their BTC which is true if you are smart about your use of exchanges.

Personally I feel it's better the equipment pricing reflect a weighted average of the BTC value. I feel this approach may have helped cast a wider net of small/medium farms and contributed to a decentralized network. Mind you this may not have mattered as we have currently seen with these early adopters using BTC as an intended currency they created certain behemoths controlling massive amount of hashpower.


Every time I've considered this I come back to why one issue. If BTC were not continuously valued against a FIAT pairing it would help push it towards a currency. I have long been a fan of the Barter system, it is at it's very core a decentralized unregulated system. The people involved decide value, and in the early stages could help in adoption and with adoption create an ecosystem of value centered around BTC



Yes I think the two have something to do with each other. The volatility has brought in the "short term trader", who was already doing this so why not try with BTC. They aren't here to understand anything beyond the value of BTC and how to exploit it. This brought in more people from all walks of life, they approach with the same attitude towards BTC. The FOMO definitely had a lot to do with the media representation as it drove more and more people into the network, but not because there was news but due to visibility, it was a space filler for the network and at the time the price was driving high. So negative news I thin kmay prevent someone from jumping on board, but I don't think many people understand the nuances of what the news means for BTC.


I feel the volatility is good for driving people to use BTC as a currency, but I worry it prevents larger businesses from adopting it in day to day use. I think it works great for a medium to small sized business as they can cash out at days end should they choose. Possibly with more businesses in that range creating a wider network for its use the price can lose some of it's volatility for larger non crypto businesses to adopt.

If I am not mistaken, I will just have to state the obvious reason why satoshi created bitcoin in the first place. To have a decentralized "CURRENCY", not an asset. So basically the idea to buy and spend not to HODL.





Why? because of the lack of knowledge that most bitcoin users does have. Especially the users from the third world countries which only uses bitcoin because of the idea of getting rich, as you have stated.

I don't know if I should include this but the idea of why did Satoshi created this currency is being performed illegally?

Black market has been using this currency and have been taking advantage of its benefits





I think we should start making more self moderated threads from global sections.  As what hilarious said :

Then allowing OP to self moderate its thread for anti spamming can really be a great help for them.


Lastly, I am quite saddened that the current state of bitcoin industry is starting to turn into a banking system because of the KYC policy that most exchangers have been performing.

That's about what I wanted to say in this topic a few days ago Can you stop calling Bitcoin an investment? (https://bitcointalk.org/index.php?topic=4756504.msg42963723#msg42963723) (unfortunately, I didn't get a decent discussion in.) and in addition Up to Two-Thirds of Bitcoin Transactions Have No Economic Value (https://bitcointalk.org/index.php?topic=4839855.msg43663967#msg43663967). The percentage of Bitcoin transactions for illegal activities is negligible (well I exaggerate a little, just minimal) Nowadays people prefer to use other privacy-centric coins. Five years ago the analysis of blockchain data was saying up to 90% of transactions are related to illegal activities, nowadays the percentage is only 10%. (1)

Crypto speculators now are the majority responsible for the Bitcoin transactions (1) and so making it an asset. It's sad but it's the reality and we have reached the point that it won't be reversible



1. (Bitcoin Speculators, Not Drug Dealers, Dominate Crypto Use Now (https://finance.yahoo.com/news/bitcoin-speculators-not-drug-dealers-111500059.html))

It took me 5 minutes of reading before getting to your sounds-right point. I don't think we can decentralize bitcoin's price in a few words. Even in trillion dollar-worth markets such as stock or gold market, organizations still can use money to manipulate stock's price or gold's price. If cryptocurrency's market cap reaches the same level, I think bitcoin's price maybe less manipulated somehow.

Not that it just isn't that easy to calculate the costs, you would have to prevent rich people from trying to get more rich.

Since money rules the world, the price ($ value) will always be dictated by the supply and demand on exchanges. It is basically just an object being traded. In the end it all comes down to the supply and demand on the exchanges it is traded on.

IMO the correct way would not be to stabilize the price, but to increase adoption which will in return decrease the volatility itself.
There is a lot of interesting development ongoing with bitcoin. With more and more new bitcoin user (not hodler) the coins will gradually get more evenly distributed. This actually will decentralize the price, or at least the power to change the price.
But this does of course require merchant and customer to be ready to accept/pay with bitcoin in their daily life.

I say that BTC was actually invented by electricity companies, lets face it the whole time that BTC has been around more than 70 to 80% of the cost of mining has been eaten up by electricity cost. Some might think that this is a conspiracy theory, funny thing is any time BTC get to a level were mining it makes no sense the price goes up. At the moment it costs around $6,500 to mine 1 BTC.  I bet BTC does not go below this cost base.

Absolutely correct! Bitcoin has become an investment asset now than a currency system. So we have long diverted from the original thought of becoming a de-centralized p2p currency free of regulations and middle man. That's where we have precisely became a part of the speculation game. I am not denying the fact that I also have bitcoins in my cold storage with the similar hope, but I also don't have any space where I can use my bitcoins to purchase anything from any merchant, at least in my country!

To be able to spend bitcoins as a currency system to purchase goods or services, we need merchants to accept it as a payment option. This is largely missing in today's scenario. Everytime I want to purchase something, I have to convert the required amount of bitcoin into fiat and then I use it for the purchase. That's why it is not helping the crypto economy because we have very very limited options to use cryptos directly. To change this mindset, we need merchants to will accept bitcoin for everyday goods.



Secondly to the OP's point, it is only possible if the miners come together and decide that they will not sell off their bitcoins under a certain price. But it is very easy to say but very difficult to execute! To reach a global consensus of this level is not easy at all! The big exchanges can help with this decision but it will slump their business down, so they will not help either. The only choice left is the free market decision and that's what exactly we are following now!

I would love to see if anyone can suggest a revolutionary way to balance the price based on the production cost and stabilize it. As of now, I don't see any alternate route than to follow the free market dynamics which is somewhat influenced by the whales. As a small trader, our influence power is next to zero and we can only submit ourselves to the current market dynamics. Absolutely helpless here!

No. That just sounds like some Marxist planned economy where everything has some fixed value and supply and demand are ignored.


Speculative value is the real value, because value itself is just a sum of personal feelings and opinions of all the people that participate in the market.


It absolutely should, because there's no other way for it to function. Bitcoin's price is a very important part of the protocol, because it determines how much PoW can be allocated to the network. If this mechanism gets disrupted, 51% attacks can become possible. Recently there were double-spend attacks successfully executed against some altcoins, which happened because their hashrate was too low to support the price, making the attack profitable.

Also, your idea might be just impossible to achieve, because decentralization is possible thanks to trustlesness. So, to make your system work, you somehow have to find a way to trustlessly measure all the costs of Bitcoin mining operations.

I think this is a strategy to introduce bitcoin throughout the world. this is the key, if bitcoin is only used as a digital payment tool it will not be as famous as it is today. in this world there are more than 200 crypto exchanges (see icorating exchange (https://icorating.com/exchanges/centralized/)) while companies that want to accept bitcoin as payment instruments are still low.

in the future, I agree with you. that the price of bitcoin must be determined. but liquidity does not want it all.
the only thing that can control the price of bitcoin is the central bank's monetary system, the central bank is able to create, attract, and even hold virtual money including cryptocurrency so that bitcoin can function like dollars and euros.

Yes that's very true however before merchants will accept Bitcoin we need the price to stabilize a bit. That's probably the biggest problem for adoption right now. Merchants can't accept Bitcoin if they don't know what the value will be from month to month...one month it's $20k, a few months later it's $6k. That's no way to run a business. If Bitcoin were to ever become like gold in the sense that price fluctuations are more steady then we'd see more merchants accepting it because they'll know approximately what the value will be 6 months later.

Never heard that one before, but it does seem to be an interesting theory, even though I don't agree with it.

The thing with Bitcoin as speculative asset, which it still is today, is that the majority of the investors don't invest in Bitcoin with the network in mind or whatever else is going on in the background. If a large investor or an old hand wants to cash out and dump the market to $5000 to fully liquidate their position, they certainly will do so.

The only thing we don't know is how many hidden orders are there that will front run that dump and try to catch it on the lower side of the chart. It happens on Bitfinex quite regularly and likely happens on other exchanges as well, but then in a less obvious form. Exchanges are rigged to the core so we have to assume that it's happening everywhere.

Also, the cost of mining 1BTC is far too speculative. It depends on so many variables that we can't just point out one single price for the whole industry. Smaller miners are probably closer to ~$7000 per minted Bitcoin, while the larger farms frequently scooping up blocks only have $4000'ish actual cost per minted Bitcoin.

We can't blame people if why they are doing the HODL scheme. It is because of the loopholes that the current bitcoin system have even if it is giving benefits to most of the users.

I may agree that the percentage of bitcoin being used in illegal activities are much lesser than before, yet I am still pretty sure that the black market might be using other cryptocurrencies.



It is actually possible as long as the developers can make something to solve this equation. Mind that all the transactions are being calculated and by collecting all the data we can actually measure the costs of every mining operations. Then possibly the devs could create a system for it. Tho this idea is like digging a hole on the rocks using your hands.

I plan on writing more on topic about this, but to anyone that argues that Satoshi's vision was to create Bitcoin to be a currency and not an asset... Sorry, but that's not a valid argument to use to implicate that Bitcoin should be used solely as a currency.

Take actual fiat currency, for example. It's made (literally) as a currency. Does that mean I need to spend it all and not hold any in savings, stocks, bonds, 401k, etc.? Just because Satoshi's vision of Bitcoin was intended to operate as a currency doesn't mean that we can't HODL, and I think it's about time everyone stopped using this as an argument as to what's slowing down Bitcoin's progress. ::)

That's different, you use your "paper currency" /which is a big part digital now/ for the day-life expenses.
You have savings for sure, like the saving account, pension fond etc., but all those money are in circulation too, they are not stored somewhere for a long period/of course if you don't keep them in the "jar bank" under your bed/. 

We are talking about banks now. The money in your "saving account" are not actually there, if you go one day and withdraw all the money, it's OK, the bank can handle it, but if all the customers will withdraw their money at once, the bank most likely will be bankrupted, because all those money they have on paper are not actually there, they are in circulation, the bank operate with them, even if you think they are there.

Now back to Bitcoin. If everyone is HODLing for the Moon, when the "currency" is not globally accepted yet, and we have a certain supply + you cannot "print" more just for the obvious reason, then the currency here becomes more an asset.

At the moment the global vision on bitcoin is just a tool to make you rich if you can HODL it long enough.
There always will be whales trying to crash the price to buy more and sell later so huge part of the current supply of bitcoin is blocked due to different reasons.
the main two /three/ are:
- The HODLers /including me/
- LOST keys/passwords
- Satoshi's stash /can belong to both above/

The rest in circulation is just a tiny amount of the total supply. The miners are the ones that are keeping the market alive, paying for new hardware, electricity, loans etc.

I think we have to find a way to change this trend, put a stick in the wheel to escape this closed circle.

The Satoshi's vision to create Bitcoin as a currency is a valid argument. He didn't create a cryptocurrency to become an asset. This is valid for Bitcoin but not only, for all the previous digital currencies created before Bitcoin

Of course, we don't deny you can save/hold some coins like we do with a saving account in fiat but there is a difference between HODL 100% of your income and using your paycheck or coins for your daily needs and save what you can save at the end of the month.

If people are hoping to get a cryptocurrency and its advantages to be able to use it in their investment portfolio and don't really care about the purpose of it then it's not going to work as it's supposed to be


"I don't like to eat a fish from the ocean I prefer to eat a fish from the sea, but I have no problem to take a fish from the ocean and throw it away in the sea to it later"
 :D

The exchanges cannot control the price of bitcoin; in fact; nobody can. Mining bitcoin is expensive and its hashrate is increasing day by day. Hardware prices and electricity costs vary from country to country. Demand and supply will always affect the price of bitcoin. This has been the case for all assets.

I assume that you included the large investors that use a custodial solution like
Coinbase Custody (https://custody.coinbase.com/) or Xapo (https://xapo.com/vault/) in the bolded category as well?

The coins that are stored by these custodial services are also not available for the price discovery.
Obviously, these services also store a much bigger BTC amount than the casual holders. According to
this Bloomberg article (https://www.bloomberg.com/news/articles/2018-05-25/bitcoin-storage-firm-xapo-to-boost-gibraltar-operations) Xapo alone is storing nearly the BTC equivalent of 10 billion $ for their clients.

Probably there are also a non-negligible amount of BTC in time-locked transactions, which
can´t be sold even if the market drops 95 % tomorrow.

I agree. The problem being that if Bitcoin was used massively for "circulation" in the current development state, transaction fees would skyrocket again. The only exception being to use centralized exchanges/trading even more. Then we had more money for "price discovery", but also more risky deposits at centralized "single points of failure".

And I will always sustain the opinion that for true price discovery Bitcoin must be traded more against goods and services, not only against other (fiat and crypto-) currencies. A factor contributing to the stability of fiat currencies is that people associate products with concrete prices. For example, if we reached the point that "a bread must cost between 0.0001 and 0.0002 BTC and a car between 1 and 3 BTC" then we'd done a step ahead in this sense.

But first we probably need a scalability solution, like LN or (or better: and) sidechains.

Trades don't control the cost of bitcoin; individuals do. A trade is only a facilitator for the purchasing and offering of bitcoin. You can't make the cost mirroring the assets expected to mine or to help the system. How might you do it when we have an alternate power cost around the world; distinctive machines and even machines with similar specs at an alternate cost?

This is not particularly true. While not practical, anyone or any organization that is in control of a large amount of Bitcoin can create a sell wall on multiple large exchanges (or a single large exchange) with more volume than all the current sell orders that are at a higher cost. If they continue to do this, they effectively "controlled" the cost of Bitcion, albeit temporarily until the price can neutralize itself according to supply and demand.

A classic example of this is back in May when the Mt. Gox trustees (irresponsibly) sold off 8,000 bitcoin on live exchanges (https://www.ccn.com/8200-btc-moved-from-mt-gox-wallet-possible-sell-off-affects-bitcoin-price/) (like idiots), which is suspected to have dumped the overall price of Bitcoin (from over $9,200 to less than $8,500 within hours), as you can see in the historical data below:

https://i.imgur.com/SHEmcVD.png

I just wanted to address the misconception that the price of Bitcoin cannot be influenced by a single entity, because it absolutely can.

Yep, that's what I meant - LN is very much experimental, not to talk about channel factories ...

I think it would be better to base the scalability solution on many pillars, not only on LN. LN is definitively a cool technology, but a LN transaction hasn't all properties of an on-chain transaction. Sidechain transactions are closer to mainchain transactions. Ideally, they could be used for larger tx and LN for micropayments, being the main chain reserved for the really big and settlement operations.

The good thing, however, is that if the sidechain tech/MimbleWimble works, then nobody can hinder people to use it. However, if we concentrate too much on LN, and a critical vulnerability or limitation appears, this could seriously affect Bitcoin's value proposal. Most hodlers have big hopes on LN - me included - but if we had some serious research on other, competing technologies then in the case of failure we always have a fallback. If not, then Bitcoin would be viewed only as "digital gold", and I have problems with this vision, because I think a digital gold will be extremely volatile forever.

DEX are a nice technology to prevent price manipulation - here I fully agree. The missing piece being a "stable" currency which could be bought at such an exchange, to be able to move to it in volatile times.

Would high volatility also be a problem if the high volatility is heavily skewed to the upside? You can´t
underestimate the importance of the continuous block reward halvings. These events should always put upward
pressure on the BTC price and therefore in the long-term Bitcoin should always go up.
Other developments like the continuous loss of BTC that are lost/inaccessible forever, also
decreases the available supply even further.

I concede that high volatility is probably bad for BTC adoption, because it scares many people and
not everyone is comfortable with investing a decent percentage of their net worth into an asset like this.
But at a certain price point (e.g. when BTC goes up another 20x from here) people will be forced
to reconsider their fear of a volatile asset out of simple self-interest. You can´t ignore it when
all your peers are getting more wealthy due to BTC forever.

The possibility of "crazy gains", "easy Lambo", "moon", is just a bait to get people into Bitcoin
if you ask me. Many people initially buy their first BTC for exactly these objectionable reasons,
but later realize that it actually works pretty well and ideally they also get more interested in the technology
and the economics of Bitcoin as a result.

It actually works the other way around. The price of Bitcoin decides how much it costs to mine. When the cost of mining is lower than the current market price everyone goes crazy buying more equipment and the push they network difficulty up. When the price falls, unprofitable miners stop and the network difficulty goes down.

Supply and demand is what drives the whole thing, not mining.

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When the price is 20x what it is now it will take 20x as much money to move the price as well. It will naturally become less volatile as it matures and has a higher value.

I think the reason is we can't ensure the same environment; resources and cost for everyone and every country. These factors will always defer from one place to another. So; it is not only about the demand or supply; which has been there in the economic model for a long time; rather it is about how cost effectively you can mine coins and sell them on market. That is why we can't see people settling for a single price worldwide.

According to me you cannot really depend and count the price based on electricity bills; labor costs and other things required for mining as they vary from country to country. So; it will be unfair for people who have to pay a lot of money as electricity bills to compete with other miners who have access to cheaper electricity. Moreover; demand and supply will always decide the price of any tangible or intangible assets and that's the law of economics.

That would only be true if Bitcoin had no competitors - not only cryptocurrencies, but also gold and other "real world" assets, and if all Bitcoiners were hodlers (and nobody would sell sometimes to take profits).

And I think people are over-estimating the influence of block halvings. Block halvings only reduce supply inflation by the half, the impact on total supply available on exchanges is much more limited (because miners are, by far, not the only people selling BTC). But inflation is already pretty low.

The long-term bull market we're still in (despite the last bearish months) is mainly caused by the fact that Bitcoin is still a new asset, and only in 2017 it achieved a significant "market cap". I believe that there's still potential to the upside, but the phenomenal gains from the last years will not be possible anymore. The curve will be flatter and flatter, and bearish/sideways phases will tend to be longer.

If Bitcoin goes up other 20x then it will be probably a bad moment to buy. The price increases do not "come out of thin air", you must always take into account that if you want to profit from simple hodling, then after a certain time you'll want to sell (for other currencies or goods/services) them for significantly more to another person who also thinks he/she will make profit, and so on. That cannot go on infinitely, so there will always be crashes, and at some moment the long term bull market will transform into a sideways market, but still with crazy swings. The only way to fix that is to use it more like a currency.

Bitcoin is being famous around the world day by day and new miners are staring to mine bitcoin. So we do need a revolutionary change in bitcoin pricing. But it is simply not possible to make the price based on ones cost. It will vary too much from place to place which will eventually be a serious problem. So selecting one standard is the only way to stop a chaos to spread around the bitcoin world. There is nothing to be done. Sometimes centralization is necessary for proper management. It will be better if we don't mess with the price of bitcoin.

There is only one major force that will affect the price of the coins; that is the demand and supply of the coin the people holds for it. Other then that; no other factors can be responsible to manipulate the price level.

The price levels are not hampered or affected by the exchanges. It is the demand among the people that they hold for the coins. If the coin has higher demand; the price will be high and vice versa.

Generally; I do not agree with the statement that price of bitcoin is controlled by the others. I believe that price of crypto currency in the market is determined by the supply and demand. There can be manipulation of such demand but I think bitcoin is not involved in that.

As the quote reads "Bitcoin market is highly speculative and largely unregulated. Invest in them which you can afford to lose". This wasn't the one satoshi thought and investing in btc ain't an investment. Does anyone consider having money in their fiat raise in future? For instance, one has $10000 this year and has kept them in secret shelf for 10 years. Once after 10 yrs, this would be the same $10000. Bitcoin is meant to be used as a payment tool and a digital alternative to the fiat money rather than investing and Holding them for future profits. Bitcoin was not created to be used as an alternative to Gold/Silver which would appreciate in future. Limitation in total supply is another factor which is why Bitcoin is being compared to Gold.

Hence there should be adequate adoption of btc in the daily lives of people. For this to happen there needs to be a large portion of the coins to be circulated among the people rather than whales holding them in wallets. Moreover the cryptocurrency has become more of a holding stock rather than a using them as a digital money.

Above all, mining also consumes huge volume of electricity and money and price of the coin is also somehow based on the value to create a new one. Hence unless there isn't a larger adoption by the population,global acceptance and holders holding the btc, we won't see the speculation to end and the price will pump and dump always. There may be a larger adoption and global acceptance in future, but holders liquidating their btc would never happen and hence the rich gets richer. Also, btc is becoming more of a centralized currency with bitmain dominating the mining part. These doesn't seem to be a good road for btc dominating the fiat money.

Gold and silver were both originally used as currency. I think that the similarity with the limited supply and the mining analogy show that it was very much the intention to have a deflationary money. You have to remember the context of the time Bitcoin was created. It was the aftermath of the 2008 financial crisis which led to central banks running huge QE programs where peoples wealth held in fiat currencies was deliberately devalued by government policy. That can't happen in a decentralised system with a finite supply. That's exactly why people that understand that part of Bitcoin would rather store their wealth in it.

I agree with your statement. As to what satoshi mentioned in his paper, his main intention was to use the electronic transaction without a third party and to prevent the double spending problem which was prevailing in the earlier predecessor of bitcoin (hashcash and b-money). He has never discussed about the inflation, though he has stated that his main goal was to create a immutable currency. He might have thought that the capped supply could prevent inflation in the value and a stable price would be reached. But since miners receive the coins every 10 minutes, this speculative value won't reach a stable price soon.

Not to be pedantic here but you missed the most important word out.


Transactions not having to trust a third party and being irreversible is part of it. My opinion here is that although it isn't explicitly stated in the white paper he went much further and didn't want to trust the creation of money supply to a third party either. Otherwise, we could have ended up with something like Tether. A payment system on its own doesn't require its own currency, but it does require trust in the issuers of whatever currency is used.



He could have just as easily set a constant block reward of 50 BTC forever. This is what makes me think most that he had the intention of making Bitcoin a digital gold. There is a finite amount of gold below ground and as it is mined the easiest to extract gold comes in to supply and as time goes by it gets ever more difficult to mine the gold that is left.

It's just a personal opinion but everything about the design tells me this was always the intention. The words in the genesis block  “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. It wasn't that banks were going to fail and depositors would lose money, it was that governments were devaluing our money to bail them out. We all paid for those bailouts.

The cost to mine 1 btc depends on the region

Electricity costs (low cost near big dams in China), government subsidies (like Venezuela), hardware costs also depends on the region...
This image summary it

Why would someone pay more for a btc than the exchange price?

https://www.investopedia.com/news/how-much-does-it-cost-mine-bitcoin-around-world/N
https://i.investopedia.com/image/jpeg/1520501899285/bitcoin_mining_costs_around_world_chart.jpg

Why the centralized exchange price has to be determinant for the overall price of the bitcoin?
If you want an non-speculative price then ALL the deals have to go trough exchange which cannot really happen here because people will most likely trade p2p as that's the idea behind the bitcoin, not trough 3rd party + paying extra fees and the KYC s#it.
Same with the banks, they try to push you so most of your deals/trades to be online and "traceable" and do not encourage the use of paper banknotes anymore. You have a limit in withdrawing paper money. In Sweden for example they plan to remove the paper-notes at all, so no shady deals can be done using the Swedish krone without being questioned.

So really we do not know the real Supply/Demand situation, only what is seen on the exchanges. It's kind of a bottleneck if you relay only on the exchanges. We can check the transaction in the blocks to determine approximate movements but this is not exact as people move funds from one wallet to another + soon the LN will move part of the flow off the chain.

As we have seen in the past, some exchange scam schemes can really affect the price, why? As the bitcoin itself is secure enough we based the price on the perception of security on the 3rd parties as they are the weakest link.
I still think that the bitcoin is supposed to be decentralized and the same thing with the forming of the price, that's the only way to the wide acceptance and world financial dominance.


 

The price of everything in the world is speculative. That's the way free market works, bitcoin can be no different.
It depends on the sentiment about the future of that asset, or object, whatever.

I will make some examples
Few months ago there was a truckers strike in Brazil. They blocked refineries, so no gas could reach gas stations.
There were plenty of gas in the gas stations, but there was a sentiment that it could become scarse.

So everyone went to gas stations and tried to buy gas. The price wnet about 40% up, until the government decided to intervene and prohibited more raises in t he Price

Then people thought"if there is no gas, soon there will be no food"

So all good price went about 30-50% up as well.

There was plenty food and gas. There was no shortage. However, the sentiment was that those items could become scarse, so the price went up.

It's the same thing with bitcoin.
The sentiment that China is going to prohibit it, or that the ETF will never be approved, those things affect the price globally, because it is a global asset.

And if you decide to sell 1/2 the market price P2P, I will buy from you and sell on coinbase until all your bitcoin is gone...


Take a look at Turkey fiat currency now.
They have a crazy president who wants to implement an heterodox economy plan.

The country economy is the same today as 20 days ago. However the sentiment is that it will collapse soon, so their fiat currency is about 40% down (don't know exactly).

However if Turkey president (or dictator whatever, I don't know exactly his case) says on TV "I gave up may stupid plan" Turkey fiat will immediately recover, at least a few %. That's purely speculative, based on the sentiment about the future.

That's how everything price is calculated. Freely.

The only way to change this is through coercion (like government intervention)

You have a very valid point there, but is the cost of the electricity being used to mine it, the only method to do that? Let's say for one moment that we use that as a measure of cost, would it not give governments a tool to manipulate the price too?

In my country the electricity cost is determined by a government organization and then pushed to the local municipality and they will then add their cost onto that base price. Which price will you then use as the base price? The price that the end user pay or the base price provided by the government?

I would rather live with the price being calculated as a average of several independent global exchanges, than having a price being calculated by some corrupt governments electricity cost.  ::)   

It's not just about demand or supply; has been in the economic model for a long time; Instead, it's about cost effective you can exploit the coins and sell them on the market. In my opinion, you can not really depend and count on electricity bills; labor costs and other things needed to be exploited as they vary between countries. Moreover; supply and demand will always determine the price of any tangible or intangible asset and that is the economic law. So, we need a revolutionary change in bitcoin pricing. It will change so much from one place to another that will eventually be a serious problem. Nothing to do. It would be better if we did not mess with the bitcoin price.

Again the bitcoin price drop is a hot topic, I still think that relaying only on supply and demand factor is not enough to have it stable.
This is a revolutionary 
To make a stable currency, we need to back it up with something valuable. Most of the fiat currencies are backed up with gold/silver. What we do with bitcoin then?

Fiat currencies, by definition, are not backed up by anything, just like Bitcoin.

https://www.fool.com/investing/general/2015/12/06/fiat-currency-what-it-is-and-why-its-better-than-a.aspx

Fiat currencies are backed up by government that issues it.

There is no good / silver backing it up anywhere in the world. By definition.if it is backed, it is not Fiat.



I don't think that is a problem for Bitcoin or any other Fiat. There are some cryptocurrencies backed up by gold... But isn't it better to just buy gold or gold etf?

Yeah, my poor English is playing a big role here. Thanks for the clarification. I knew that the Ruble is gold-backed currency but also government-backed too the same time but I had to read a bit more about fiat.



This is quite intriguing.
I just found that > http://www.goldscape.net/gold-blog/gold-backed-cryptocurrency/

I believe yhe problem with backed cryptocurrencies (no matter is usd or gold or silver etc) is that you have to trust the issuer.

Like tether. Everyone will be asking for an audition, for regulator agencies (i.e government) to say that they are backed up ...

So a gold backed cryptocurrency would be a total scam, or an audited centralized currency audited by a regulated agency ... In other words, somewhat controlled by government.


Governments would have a  high control over it, because it would charge taxes, create new regulations, etc and they would need to do all government's demands, or it would not pass the audition.


I believe it's just better to buy gold itself, or  an ETF backed gold (which would be the same as a cryptocurrency but more reliable)