Bitcoin Forum

We all saw China frantically purchasing all at once, thereby shoving the price from $300 to $1200 practically overnight.

Now all that nonsense is gone, Gox failed, etc.

I just read an article today stating:

"The number of business accepting Bitcoin as a currency has grown sharply in the last year.  They now number in the thousands."

At some point adoption levels need to start "latching into" the market price, and begin "dragging it upwards". At some point, speculation value will be replaced by demand, right? Its just strange to me that we aren't seeing that yet.  I often wonder what the "true value" of a Bitcoin is, if you were to eliminate speculation.

By true value, I mean its value supported 100% by adoption, commerce, and demand for more.  We must still be in the lower hundreds.  Because despite thousands of new merchants, the price doesn't seem to have begun nudging upwards permanently.

-B-

Permanently is a hard word. Stable is also a hard word in the bitcoin world so dont expect too much reasonable things to happen

The recent adoption has been priced-in already. Question is when will regular Joes notice it and start pouring money in?

Actually I think the current dynamic is actually one of coins moving from the hands of very early adopters to overstock and tigerdirect for example, who then sell for fiat.

overstock isn't selling to the market.

Ok.

I still feel like there's a bubbling "number" for the real value of Bitcoin, which is "bubbling" around at ... say .... $320 .... and everything above that is speculation value.  So next month that number bubbles to $340 .... then $410 in a few months ....

Eventually at some point, that "real value" matches the "current market value" .... and from that point the numbers start to rise ... being dragged upwards by actual adoption and supply/demand.

Versus speculation.

-B-

It's all speculation. When you buy bitcoin with the purpose of immediately selling them again for a product or service you are speculating that the money you pay for them will turn out to be worth the desired product or service. There is no such thing as not speculating in finances. Not even if you are not aware that that is what you are doing.

There are still two sets of numbers.

1)  The real value of bitcoin based on adoption and supply/demand for commerce
2)  The value of bitcoin motivated by speculation.

I don't believe its all speculation.  I believe there are two levels that make up the current price.

At some point, adoption/supply/demand for commerce will begin to push up the market price.  There may always be a buffer of speculation on top of it, but we should see a continually increasing value overall once this starts to happen.  Right now all we see are high values that "dont crash as far".  That tells me the "real value" is slowly increasing ... as a subset of the current market value.

-B-

The real value is always whatever the immediate going rate is. Which is also pure speculation. You can't separate the two, they are the same.

You know what I am getting at.  

There is absolutely a speculation price, and a more realistic price moved by adoption/commerce demand.

There have been countless threads on the topic, usually titled with:  "Whats the real value of Bitcoin".

Countless articles.  you know what I mean.

It is not all the same thing.

This is sort of taking the conversation off track.

I remember reading somewhere that if bitcoin currently was merely used as a payment system and not an investment vehicle the price would be about $60. I think it was Marc Andreessen who recently said this.

Yes and other articles that state if BTC were to take over the market currently serviced by Western Union and Amazon.com alone, the price would be forced upwards to $40,000 per BTC.

This is what I am referring to.

That isn't "speculation".   That is a value moved by demand/supply/commerce.

As I said there may always be a "buffer" of speculation on top of the 'real' value ... but at some point the 'real' supply/demand/commerce is going to start pushing the price upwards without stopping.  Even if it only pushes it slowly.   

Im wondering when that will begin.

-B-

Threads like this remind me why it's fine that I don't know what the price will be tomorrow or an hour from now. The price is whatever the total market dictates it to be, whatever the current majority motivation. I don't worry about it. Mostly because it doesn't much matter but also because it is pointless without a way to get solid numbers.

For Bitcoin to find its 'true' value, a long slow deflationary (price) period is required, signified by a lack of new speculative capital coming into Bitcoin and holders of Bitcoin gradually cashing out for USD. In short, Bitcoin will never find its 'true value' so long as the market is infested with almost purely speculative capital. The volatility that Bitcoin has experienced for much of its short life renders it totally unsuitable for being used as a reliable means of exchange or store of wealth. The speculators need to be scared away and the best way for that to happen is for a prolonged low volatility stagnant bearish period, discouraging holding, encouraging Bitcoins to be actually spent, all while hundreds and hundreds of Businesses adopt Bitcoin as a payment option.

The true value of Bitcoin could grow to be massive, but for that to come to any long lasting fruition, I stress again that the speculators chasing fast bucks need to be shaken out.

You would also need to know and account for the future velocity of the bitcoin in the system.  This is a big unknown, and made all the more so by the fact that bitcoin was designed to be capable of a very, very high velocity.

The faster the bitcoin moves, the less of it would be needed to conduct a given daily transaction volume.  Tools could be developed to keep bitcoin moving at a very high velocity.

I don't know how velocity is expressed mathematically, but it is pretty easy to imagine that in a perfectly efficient bitcoin system, bitcoins can transfer every block, so the fastest possible cycle time would be 10 minutes.

If every coin transacted every 10 minutes, currently that would be $48 Billion per hour, $1.1 Trillion per day, or $400 Trillion per year.  Coins could move even faster with off-chain transactions that settle in seconds.  But if people keep savings in bitcoin, and considering permanently frozen bitcoins that add zeros when calculating the average velocity, it could be much lower as well.

I think forecasting what the velocity will be is the tricky part of answering your question.  It would be very sensitive to technological, social, and economic factors.  Speculative behavior itself would even impact the velocity.

yes it is all speculation. but speculation plays really big role in our crypto-world.

It is speculation which drives the whole crypto environment. We are holding because we speculate on its value in the future, otherwise we would sell them right away.

Yeah they are, they use Coinbase as payment provider.

Overstocks CEO however, is a Bitcoin-believer and has invested a considerable amount of his personal funds in Bitcoin. But since the company has all its expenses in fiat, it would be hard for them to keep their Bitcoin income as Bitcoin instead of converting it back to fiat.

True, there is no such thing as a true value in bitcoin besides its speculative value. If there would be no exchanges, but only merchants and customers, they would have to argue (speculate) about the price for a product/service.

Merchants and customers would then look at other (bigger) merchants and customers, to which price they agreed to.

Merchants and customers would do the work of the exchanges, that is all. Problem with the value of bitcoin is, that it is highly volatile because noone can assure you, that it will be there tomorrow.

At most times, speculation is 95% of the price and adoption is 5% of the price. Sometimes during the 'bear markets', adoption reaches as much as 10-15% of the price but speculation is still 80-85% of the price.

Know what you are getting at. I've been asking the same question, with similar answers...
I'm guessing, but I wouldn't be surprised if current adoption hadn't been more than priced in by speculators and so, with MatTheCat, I'm half expecting a stagnant period as the 'real' value goes up as the infrastructure grows but speculators cash out at the same time. (Only half, because it's bitcoin, so anything could happen tomorrow.)
My question is what effect will new money have, if say a VC buys $1m of bitcoin, or 1 million ordinary Joes decide they want to keep $10 worth of coins to buy beer with. How much does that push up the price? That's a more 'realistic' valuation to me... but I've little idea how to go about calculating it.

the speculative side of bitcoin is its marketing department.

the more it rises the more the hype grows, the more people will adopt. works fantastic, imho. and it is the only way that the bitcoin economy can wrap itself around other economies. if it had stayed at $ 1,- only a few hundred thousand people could use it, because goods  worth only 12 mio could be bought with it (in one circle).

in order to go mainstream as a worldwide payment system price has to go up big time. we should be thankful for speculation that is driving the price up, adoption is following.

 

All the big businesses that accept BTC probably convert it to fiat ASAP, so that's not going to push the price up. As bitcoin's user base grows, so will it's price, until it reaches it's max potential users.

Talk about a purely speculative statement. That statement might actually redefine the term.

This makes no sense. While one a micro level, Bitcoin is hampered for adoption by lack of applications making it easy to acquire, use, send, and locally remit, on a macro level it is hampered by being too small of a market cap.

In this way, it could be argued that MORE speculation is needed to drive up the market cap to make bitcoin more usable for large financial industries, including international trade.

Having a prolonged bear market will only lead to another HUGE bull market anyway. Its unavoidable. To get from $600 to $40k (Winklevoss' small bull cap prediction) means V O L A T I L I T Y. No way to avoid speculators.

What? Everyone is just going to be so afraid that bitcoin went down to $400 (or, OMG a $100 in your bearish fantasy) that they will avoid riding the train to $40k?

Ha. Its going to be become more volatile folks (not a % basis but on a dollar basis). Grab your seat belts folks.

If you look at the distribution of XBT you will see that we are in a period of growth right now. The coins in wallets with a balance greater than 1,000 XBT are decreasing while the number of coins in smaller wallets is increasing rapidly.

The market price isn't an entirely accurate representation of mainstream demand. The events of late caused a lot of stress and sell pressure to some of the earliest Bitcoin holders; this trend can't last forever...

Once those large holders either change their opinions, or finish cashing out, the price will begin to increase again. The distribution chart is showing that Bitcoin is being bought and held more than it is being bought and sold as an instrument of speculative trade. The coins held on exchanges aren't represented in the chart because the exchanges don't use individual Bitcoin wallets; what we see is an increase in the number of people holding Bitcoins off exchange which is indicative of Bitcoin holders going long...

I think the price will go back up soon. The distribution of coins is looking better and better every day...

Lol, yeah, I love these "accurate" posts too :D

If the key to having a successful unit of exchange (a.ka. currency) to facilitate trade and act as a store of wealth, was for its value to fluctuate +/- 1000% within the space of a few months, then central banks the world over would be ramping the fuck out their currencies and then crashing them to the floor as a matter of general practice.

There is a reason why 'ensuring volatility' isn't a stated policy of any central bank, anywhere.

Any asset that is driven purely by speculation has a limited lifespan. A very limited lifespan. This can be seen in the Alt-coins just as it can be seen in the penny shares, where both sectors are dominated by professional pump n dump sharks.

I agree that further down the line in the future, Bitcoin needs and will probably get greater volumes of speculative capital than ever before. But in order to entice fresh speculative capital in, some kind of solid foundations need to be established. Bitcoin needs widespread adoption where it is used for its intended purpose and for this to occur the volatility needs to be forced out the market. Bitcoin needs a long boring as hell bearish trend a la 2012 style and I believe that this is exactly what is on the cards for Bitcoin. If however, the wild volatility persists, then us traders get our dramas and opportunities to win or lose small fortunes, but Bitcoin remains a lunatic fringe concern of the financial world, used only by those looking to make off-radar financial transactions or in certain states of isolated emergency.

Anyone who actually 'likes' Bitcoin, would not just agree with me, but actively hope for a long boring bearish trend for the reasons I describe. However, most people I suspect are far more interested in seeing the nominal USD value of their holdings shoot through the roof than in the well being and wider adoption of Bitcoin per se.

Darn.

As the "OP", I really was wishing to hear that adoption/commerce/propagation was soon to burst through that $600 price and start dragging the value up, even if slowly.

Maybe its all speculation based still :(

Oh well, patience BittBurger.  Patience.

-B-

Well. That's a cool story, bro.

And you make some valid points.

But, looking at the tea leaves (VC and WS) and a crap ton of EW analysis, I think before your scenario plays out we are going to have another large push upward. This 'ol 2011-2012 comparison is so wrong for so many reasons - the main one being that $32 in 2011 was so far beyond the real value of bitcoin (I mean, have you seen the log charts?!?). Going from $120 to $1200 is small potatoes compared to that rise.  So before we could get that bearish for that long, I suspect we would need to go north quite a long ways first - way north - much further than the paltry $1200 we got to for a few days.

We are not going to go from here to $50. Aint. Going. To. Happen. Not with regulations coming and US exchanges and hedge funds and trading funds that "normal" people can invest in. There is more speculation coming over the horizon.  Its arriving this year.

So don't get that fiat too cozy in that German bank of yours.  Bitcoin isn't going to rest just because you would "like" it to.

If and when we hit the 300 EMA currently at around $450 and rising, you need to prepare yourself friend. Then maybe when we skyrocket to $10k, you can ease off the pedal for a year and a half and watch the eco-system catch up. ;)

Funny, the same thoughts of 'blatant confirmation bias' occurred to me when reading your post.

I stated what I stated a few days ago and since then, Bitcoin has done exactly what I said it would do. At this point in time, I believe it is more of the same. I shall let you know when I change my mind.

My first buy in tranche at $593 would have gotten triggered, but I removed it (along with all my other buy-tranches), cos I just didn't see it as all that worth while. As it happens, I could have turned a $300 profit had I left it intact.....pffftzt.....not worth the risk that the buy-in tranche is triggered but Bitcoin goes lower and gets stuck in a range that makes me a bag-holder. Something I have never been in Bitcoin and refuse to become.

It's pretty obvious we are going down. I didn't realize that was in debate. As I said the trend like is in the 400s and rising. It will go up again within the next 90 days. You want to log off of here for longer than that before you check to see what's happening? No, I didn't think so.

I didn't just say it was going down.

I said it was going to be pointless trying to trade it short or long. Both sides of the trade liable to being whipsawed around, not very much reward for patience or enduring the risk and be assured, that the mofos on the leveraged trading exchanges are looking down their trading book and taking action to squeeze as much blood out the market as they possibly can. If you were in the position to do so, wouldn't you be tempted? Especially considering these places have zero oversight. I know they do it and a trader is especially vulnerable to getting fkd in this way during low volume stagnation periods.

A horrible pointless market from a speculators point if view is what I called, and is the way I expect things to continue for some time. Of course, I am always ready to change my mind or take a good opportunity if I see it.