Bitcoin Forum

I really don't understand this very much.

Bitcoin is at $5 1 BTC. How did it get so low compared to the $20 I used to remember and how can we bring it up?

Thank you.

It was only $20 for a very short period of time when there was a media blitz on it.  January 2011 it was like $0.30 and ended the year at like $4.  I think it will in take use and time.  I expect $10 bitcoin at the end of the year.

But why did it drop that much?

Because it was only a bubble in the first place.  So the better question is how did it get so high in such a short space of time.

And an even better question, why did it not die like all the pundits predicted?

And maybe the best question...

"How to Make bitcoin be worth more?" <--  Why?  What does that do for bitcoin?  Do you expect more people to start using if it trades at $20 instead of $5?

Excellent point Stephen.

What was rambling around in my head when seeing the OP's subject line, was relative to what?  A head of lettuce, a bushel of wheat?  What it's worth relative to the old fiat currencies is only important to those that still have a mindset to think in those terms, the sooner the day comes when nobody bothers anymore the better off we'll all be.

It will trade at $20 instead of $5 if more people start using it. Higher price is the consequence of wider adoption, but probably not the cause.

Right now almost nobody is spending Bitcoin. They are trading representative mtgox credits in lieu of Bitcoin to make the price fluctuate, but that has little to do with adoption. The price is low because miners are willing to go to market with their product at near cost because they are bad businessmen. They should have a higher markup and sell to brokers who in turn move the bitcoin to whatever exchanges offer the best action.

Nobody? Really? Every day hundreds of people buys drugs and such on black markets like Silk Road, and that's the only reason I trust bitcoin to succeed.

Lots of food for thought here, agree most comments seem to have part of the answer.  For some reason I keep coming back to thinking about the use of coins within the construct of commodities as the best way to broaden it's acceptance, here I'm talking about things like corn, wheat, cattle and the like.  Once adoption could be made for basic things like those, then it's eXchange rate between the various fiats would stabilize, or dare I say disappear.  

The question is how do you get such a wide acceptance of BitCoin usage, that price discovery can start to happen independent of local fiat?  Only think I can think of, is if they were to diminish in acceptance & use.

Imagine we take one of those 30,000 counties in the USofA, say it's filled more with millions of acres of wheat than people & all of them farmer hicks in that county agreed:
  
  We want nothing more to do with federal reserve notes, charge backs and re-hypothecation crap being throw at us.

Furthermore, suppose they said to those of you outside our county, if you want our wheat, you need to offer us a price in BitCoins, we're now excepting offers.  At that moment, true price discovery could start to take place for BitCoins in terms of a substantial quantity of wheat.  It wouldn't be long before a huge avalanche of acceptance in many other areas could follow...

just some more thoughts to gnaw on...

It's just an exchange rate. Do you say, "How to make the USD worth more?"

My view is you don't worry about how much it's worth and don't try to evangelize it to everybody. Just use it yourself and let it grow organically. Bitcoins are to money as the internet is to information. No one had to go around selling everyone on how great the internet was and just why they had to use it. People just slowly saw its potential and how it could make their lives better and while the first several years were just a bunch of geeks talking on message boards like this one and later a lot of people looking at porn, slowly the internet began to take over every aspect of our lives to the point where we can't imagine not having the encyclopaedia known as google in our pockets to look up practically any bit of information we need or want at any moment of the day or night without having to go to a library or lug out our decades old encyclopaedias and the yearly addenda.

All this to say... the very point of bitcoin is that it's not centrally controlled. So stop trying to control it and just let it be. :)

while the exchange rate has been stagnating, some markets have been booming over the last months.
my favorite example is virwox:

http://bitcoincharts.com/charts/chart.png?width=940.5&m=virwoxSLL&SubmitButton=Draw&r=&i=Weekly&c=0&s=&e=&Prev=&Next=&t=&b=&a1=&m1=10&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&v=1&cv=1&ps=0&l=0&p=0&

I can pay for a lot more development on my bitcoin sites at $20 than $5. I earmarked 1000BTC for development, advertising and promos for Seals. At the time that would have gotten me $15k worth of value, by the time I used the bulk of it it got me about $3k in value. The value of Bitcoin is the health of Bitcoin.

I'm not sure why this would be the "best" question given the fact that it doesn't have much to do with the purpose of this thread. There is nothing wrong with the OP trying to raise the BTC-USD exchange rate - there may be valid reasons for doing so. I cannot deduce that he tried to do something for bitcoin or to have more people using bitcoin.

Raising the BTC-USD exchange rate can be achieved by understanding basic mechanisms of free markets. For example, the exchange rate will go up if you spend enough resources for buying bitcoins, either by selling USD or by selling goods or services which have some value on USD-based markets.

Isn't this point purely rhetorical? If bitcoin was centrally controlled and the OP was in control of it, I don't think he would ask here. As it is not, virtually everyone may attempt to manipulate its value. Now, if we try to evangelize people not to do so, the bitcoin community will fail to develop methods to cope with that manipulation, and may fail badly later on.

Well, if you speculate on an increased bitcoin value using your development and marketing budget, this is your own business decision. If this speculation results in losses, it is rather inappropriate to try to have the development or marketing guys cover the losses, or to compare the private mis-speculation to the "health of bitcoin".

Sadly, many companies buying development services using bitcoin seem to go this route, resulting in rather ridiculous offers for software development. I would rather take the opposite position: it will be healthy for bitcoin if bitcoin companies stop blaming bad decisions on the bitcoin exchange rate. If someone doesn't believe in the bitcoin value going up, he can still sell and invest is something else.

The best place for BTC to grow is virtual reality, and virtual world economy is going to be larger than physical world economy in the near future, just like software company outpacing hardware company

But the biggest problem today is that so few people have possibility to explore the beauty of the virtual world. They need top level display and graphic card and a game like Skyrim to be enough realistic to match the real world, they need lot's of computer knowledge, and some of them get motion sickness due to the poor display technology that we use today. Those problems have to be solved one by one, and by then virtual reality will become people's daily life

If there is a decentralized virtual reality world, then BTC will be adapted very quickly. As I know, second life is still centralized, maybe in the future a collaboration project combines best VR engine developers will make a basic framework   

I am telling you ... it is all a big government conspiracy !

Maybe SR is getting less sales and the hoarding stopped and people lost faith when it went to $1.9 ;)

I can get a lot more bitcoins for my developer skills at $5 than $20. You made 1000 BTC for a few days of CPU mining in the early adopter days. Now you want people to do a lot of work for those 1000 BTCs. The value of Bitcoin is the advantage of early adopters on the masses. Once that advantage starts to level out bitcoin will actually start to function as a currency.  ;D

I do not understand your question. You are apparently rather fresh to bitcoins so you can't be sitting on hundred thousands of early mined coins. So why do you want the price to go up? It's a currency! Unless you happen to sit on a pile of them it's simply an efficient way to translate the value of a good/service you are providing to the value of a good/service you want to acquire. All that matters are:
- liquidity / ease of transfer / cost of carry of the currency
- relative values of services sold vs. acquired

You could do the transfer of value in dead white geese if the exchange was sufficiently liquid and the transactions painless.

+1

Dead white geese may be a better investment than most currencies, but Bitcoin is not a currency by design. There is no set limit to geese, tulips, or benjamins, but Bitcoin is finite. Speculating on Bitcoin will increase the value as more people go long. The currency aspect of Bitcoin will be realised when folks actually choose it over debt-based-enslavement currencies.

I'm not saying that the price being high is best for everyone, just that if it was higher I'd be richer and build more Bitcoin stuff. I'm probably not the only one like that. In a global sense the price has to be higher for a lot of businesses to join in. A total 'currency base' worth less than $50M isn't going to work for thousands or millions of large Bitcoin businesses. Adoption raises price and price raises adoption possibilities so I'm not saying that we need to pump it up or something in order to get wider adoption, only that the two will come (or not) together.

Somewhat unrelated, I always try to get good deals on labor and labor always tries to get good deals from me.

Bitcoin is unlikely to ever increase in value again significantly.  Given four to five years, something bigger and better will get overvalued - a stronger crypto-currency with a client that's usable by more than the smartest 5% of the population, transactions that authenticate fast enough to be meaningful in an actual merchant setting, etc.  Everyone knows that dutch tulips bloom once...

Oh ye of little faith.

Had the bitcoin ecosystem been a little more mature last June we would have have the ability to sell put options and shorting on Bitcoinica, and that sling shot to $30 would not have occurred.

Hopefully these financial tools are successful and attract even wider use and more competition that will help lessen volatility.

But think about what is happening.   There is all of this innovation occurring but almost none of it is coming from the leaders in the space.  Could a commodities firm add bitcoin as one of its holdings that it trades?  Certainly.  But none do, ... at least not publicly.  Yet we are seeing much of what works in the fiat world replicated, from scratch, from the ground up, so that Bitcoin is afforded the same capabilities.

Put and call options.  MPEx.  Check
Margin trading on a CFD (Contract for Difference) market: Bitcoinica. Check
Fast funds transfer method for fast international exchange of funds:  Redeemable codes from Mt. Gox, CryptoXChange, Bitstamp, and more. Check.
Equities market:  GLBSE and MPEx.  Check
Synthetic instruments: MPEx.
Lending:  ... well,  that's a weak spot yet.

These all fill a need, and will likely be joined with further competition as the market grows.  I don't know at what level all these will cause the exchange rate to rise, but what they will do is to work in concert so that if a rise comes, it won't be just some bubble due to liquidity issues like the last time.

Yes, and we can duplicate bitcoins as we can grow tulips of course... ::)

Man, this is such an easy one...

Even though there is a ~33% inflation rate at the moment, Bitcoin is a limited resource. Simply increase the demand and it will go up in value. How many people do you think know about Bitcoin? A million? There's 7 billion people on the planet who have not had the pleasure of meeting Bitcoin.

Teach your friends, family, and coworkers about it and grow their trust in the system. Share it with them by exchanging with them. Ask them to buy your next beer and give them some Bitcoins for it. Network effect is everything for Bitcoin.

Remember to consider the volatility of the numéraire. Floating currencies are valued against nothing but other floating currencies. Obvious point, I know, but it's often overlooked.

Sort of, except I have to nitpick about definitions. (You'll see why in a moment). For me it's something like this:
Bitcoin has some value in people's minds. They swap dollars and bitcoins for a certain exchange rate. The price of getting a bitcoin is having to part with 5 dollars. Meanwhile, the demand for Bitcoin is a nebulous economic term that graphs the total amount the population is willing to buy at a range of different prices. A "bid wall" is a real-world estimate of demand, except that it stops at the "ask wall" instead of continuing.

If we use those descriptions, we find that the demand is driven by the value. If we want to increase the price, we have to first increase the value, which will then increase the demand. So we can ask: how do we increase the value? And this is what a lot of people have been doing all along -- running bitcoin businesses, creating new products and services, making things easier and cheaper to do than in the dollar/euro/yen economies, and generally kickin' ass. The problem with increasing the demand just by telling people about Bitcoin is that it always starts off with zero value in their minds. It's totally worthless to them... until?? Until they stumble upon one of the many things that makes Bitcoin useful for them.

So, teach  people why
 it could be of value for them.

OP: Bitcoins will be "worth" more when more people actually use it to trade.

Technically even nukes can't stop it, so there is that?

Shouldn't it follow that if our Bitcoins are worth more we can all imporve our Bitcoin services thereby improving it's reach and appeal after all $20 dollars still buys a Starbucks coffee and personally I think one Bitcoin for a coffee is a crazy high price.  ???

What you are describing is the hope that gains on the speculation of the exchange rate will allow a bitcoin business to self-fund (bootstrap).

While there might have been a handful of bitcoin businesses that benefited greatly from the rise from a BTC/USD below $1 to it being in double digits, it is likely those gains have probably since been spent and additionally, is a move that likely will not repeat at least not to that degree nor over such a short period of time.

So Bitcoin now faces the real world, where many businesses get built and launched with the help of seed funding (e..g, CoinLab, BitInstant, etc.) or loans (few of which share publicly that they have borrowed) and to some smaller but growing extent equity gained from IPOs (e..g, on GLBSE and MPEx).  At the same time there still are many ideas that individuals can build and run solo or as a team with cofounders where only bootstrapped funds are necessary.

But the days where a few hundred dollars worth of BTCs turned into an amount that was sufficient to self-fund a bitcoin-related business are probably long gone.  And there was only a relatively few number where that had been the case of what happened anyway.

I understand but you have ask yourself what all that tor bitcoin traffic is doing? All those folk with oodles of dough, who used to have to do shady back room deals with briefcases full of pimped money, recently laundered, paying %10 to %50 for protection, are now using our currency for next to nothing. Doesn't that just make you want to take out that old pair of knuckle dusters? I mean it wouldn't make any difference to them, or any user for that matter if Bitcoin was $100 or $1000, in the end they and their customers are extremely happy, while the miners are being asked to sell that almost invaluable facility for next to cost. The reality is the crooks are getting away with it at our expense and IMHO just this one reason sees Bitcoin undervalued.

This has probably been covered 100 times, but where does one draw the line between crooks and the oppressed? If Arabs buy alcohol using bitcoin, how is that different from Westerners buying marijuana using bitcoin? Similarly, prostitution is legal in some countries, but illegal in others. Who is right? There are often lots of social problems with things like drugs and selling sexual services, but what about things that are more subtle like intellectual property? Is it OK for large corporations to cheaply produce medicines in third world countries, but then claim exclusive export rights for 20-or-so years? After all, those corporations are still profiting from America's military activities that devastated/destabilised a number of Asian and South American countries.

The export concept reminds me of an important point. Since the bitcoin economy is so small at the moment, it's hard to compare prices internally vs externally. If someone lives within the bitcoin economy and uses the currency directly for everything, how does their standard of living compare to people using other currencies? If things are very cheap, exporters (e.g.: farmers) might want the exchange rate to go down, so that they can sell more stock and make higher profits.

From fundamentals, the easiest way to make the bitcoin be worth more is to increase the scope of services and goods available via bitcoin. The bitcoin economy is still essentially a hobbyist economy, but it has passed what I believe to be the point of critical mass. My intuitive guess about the best policy for bitcoin usage is for the average coin user's behavior to match the following profile:

• buy bitcoins at a relatively constant rate, probably some factor of your income
• partition your bitcoins into two buckets, save and spend. Ideally, save should be a small factor of spend, I'm thinking 10%
• spend extra effort both to find ways to make your normal purchases in bitcoins, and to constructively criticize any points of friction in the process

I believe the net effect of this policy will be to encourage stable deflation of the bitcoin economy (deflation can occur even as extra coins are generated if the real value of services available for bitcoins grows faster than the influx of mined coins). This deflation will serve as the incentive for new users to bear the additional risks and inconveniences of participating in the bitcoin economy.

A crucial aspect is to encourage vendors to accept bitcoins. I think the sweet spot for current growth is local services, e.g. contractors, plumbers, mechanics, specifically friends and family of existing bitcoin users. If we explain the deflating asset concept, then they will have incentive to accept bitcoins via bitpay or equivalent. They can pursue some similar partitioned conversion back into local fiat, taking slightly lower immediate profit in e.g. USD, but building up a small base of hopefully deflating profit.

I see bitcoin adoption following roughly the following trajectory:

• initial experimentation, prior to real value, e.g. during cpu mining times.
• adoption as services are offered, valuation unstable and localized pre-exchange
• exchanges are offered as services, valuation globalized and visibility causes exponential growth in value based on speculating trend-chasers, begins to be used as black market currency in addition to limited local and electronic commerce
• media hype, bubble pops, we're all familiar with this
• valuation undershoots real value of services offered, gradual buy-back starts
• chargebacks cause businesses and an exchange to fail, money path to bitcoins gets harder, price remains gradually stronger (real strength of economy shown here)
• lowering of barrier to entry due to bitpay, bitinstant, etc. makes it viable for localized service providers to offer bitcoin as a payment option (<- we're here)
• localized contractors accept bitcoins, gradually accumulate extra bitcoins they can spend, begin building locally strong bitcoin sub-economies
• bitcoin will undergo massive scaling difficulty. At this point, the protocol and topology of the network will need to be revisited and preferably implemented in a more separation of concerns manner, e.g. POS nodes, spend-only nodes, economic and fraud monitoring nodes. Additionally, the probability of making stupid-human mistakes needs to be lowered, e.g. off-by-one-digit overspends, poorly secured wallets with significant amounts in them, etc.
• larger service providers (e.g. commercialized fleets rather than individual vendors) will eventually catch on and either want a piece of the action or lobby for legal action, this is a crucial point for the economy, but at least in areas where ideas of freedom are important, effective communication with the press should be able to keep the economy alive
• if larger service providers begin accepting bitcoin, it should be a relatively fast march to spread through the real-economy, because deflating assets can be accepted at a discount to inflating assets (e.g. USD), so consumers should be able to save money by exchanging to bitcoin and purchasing via bitcoin
• the economy will have actually arrived when we can buy gas and groceries for bitcoin

Jesus guys, I didn't expect to get the value of 1 bitcoin to raise to $20 in 1 day. I was just curious to what happened.
I'm really happy that 1 BTC = ~$5.1 USD. The reason I wanted to know how to make it worth more was to know what would the impact be if I built a 40gh/s mining equipment. Like, if the reason why it went from $20 to $5 was because ppl started mining more, then I would prob not spend that much on my rig.

Last year's "crash" was because the bubble burst. Back then, Bitcoin's value was much lower than it is now, but speculators kept on buying like crazy. An exchange got hacked, which caused a sudden mass realisation in many people's minds: "I paid too much". And when a lot of people suddenly don't want a product any more, what happens to its price? However, thanks to Bitoin's mini DotCom, and continued investment by entrepreneurs, the market is now more mature and the economy has a lot more value supporting that ~$5 exchange rate.

With 40Gh/s you would control around 40/12000 = 0.33% of the total mining supply. And then there's circulation of older coins. So the price probably wouldn't change much no matter what you did with the coins. You could stick them for sale on MtGox or Intersango for $5.30 each, or how about $6? The other miners would have slightly less bitcoins to sell, so they might be inclined to put their prices up slightly. Whether or not people actually buy at a higher price is another matter.

IIRC, the price had gone from ~$32 to $15 before mt. gox got hacked. And nothing irreversible actually happened, it was only through the site, no coins were actually lost.
The bubble happened because bitcoin's scarcity was artificially increased by those with existing coins. There was hardly any volume on the way up to $30, just very few actually putting coins up for sale.
It was simply a matter of "I have X amount of coins that will make me X dollars and they're burning a hole in my pocket" that caused the "crash," and the fact that the great majority of people were not stupid enough to believe bitcoins were worth $30+.

Bitcoins rocketed from almost nothing to $30 in between 2011 May -June.
http://bitcoincharts.com/charts/mtgoxUSD#tgCzm1g10zm2g25zv

This is when the mainstream media like Yahoo Finance picked it up and suddenly a small hobbyist niche became subject to mainstream interest. As millions of new users wanted to try demand rose against a non-changing supply -> the prices sky rocketed. As the new toy became boring most new comers stopped playing with Bitcoins and prices settled back.

That's a pretty inflated number... as of 2012 Jan, MTGOX, with 92% of the market, registered accounts was only 122,000.

Page 3, 5: https://mtgox.com/press_release_20120201.html

But I see that as pretty F'ing fantastic... less that 122k people caused the price of a few million bitcoins to reach $30 a piece.

Right now almost nobody is spending Bitcoin. They are trading representative mtgox credits in lieu of Bitcoin to make the price fluctuate, but that has little to do with adoption. The price is low because miners are willing to go to market with their product at near cost because they are bad businessmen. They should have a higher markup and sell to brokers who in turn move the bitcoin to whatever exchanges offer the best action.
[/quote]

I disagree.  I spend Bitcoin at least a couple times a week.  In just the last week, I've bought some DVI dummy plugs from Cablesaurus, I've bought various stocks on GLBSE, I sponsored the upcoming Bitcoin Conference in London, and I made a donation to Symphony of Science.

It's just an exchange rate. Do you say, "How to make the USD worth more?"
[/quote]

Yes.  Answer: Stop printing more of it (:

Here in Austin, I leave a Casascius physical Bitcoin as part of my tip every time I eat out, or to give to people at parties or gatherings when the subject comes up.  The physical coins are very useful for spreading awareness.

Tips would be a niche economy for Bitcoin. Many resaurants now automatically charge a gratuity fee (sometimes after tax). Who knows how much of that pays for the service you've received? If server staff wore a little badge with a QR code, you could slip them that little extra when you feel they are worth it with no one the wiser.

I think the news coverage has literally reached millions of users. I got infected by Bitcoin when it first appeared in Yahoo Finance and suddenly everybody started to talk about it. MTGOX is 92% of the exchange traded market. I believe a super majority of transactions happens outside MTGOX or FOREX exchanges. The bulk of the supply-demand balance are coming (or at least should be coming) from goods or services sold for BTCs and OTC trades. I still do not have an MTGOX membership but earn and trade bitcoins for goods and  mostly services.

I might agree, but those transactions did not affect the exchange price. All other transactions are based on what happens inside the exchange.

Everyone forgets one thing - its not 21 million, but effectively 21 trillion coins, if you use all the zeros. That makes every current miner a millionaire in btc and a potential millionaire in USD as well. Depends on how widely adopted the currency will be in a future. I'd like to make a proposition on how to make BTC more popular. In fact, many people already working on it, but BTC community is not fully aware of those projects. I'll make a short review on such projects in this thread later on.  ;)

Exactly. Increase demand.

Now, how to increase demand? I can think of two primary ways to do that:

1) Use them more, and promote their use (advertise, even if just word-of-mouth.) NOTE: Using them for savings is a bit risky, but still counts as use and sends a signal to the market just the same.

2) Make them more valuable. You can do this by contributing ideas, $$$ or effort (code, a business, etc.) to the bitcoin economy.

As it turns down dollars can be subdivided into cents as well!
OMG, I am already a ¢ millionaire!

Here's one way... Promote positive Bitcoin awareness to those around you. I publish a single page newsletter once every monday morning with the previous weeks news about Bitcoin. Print it out and post it in your workplace like your cube, mail room, or break area. Introduce yourself on it so people know who to come to with questions. If you subscribe to one of the various places I post the DL link, you'll get a reminder to print it out every monday morning.

https://bitcointalk.org/index.php?topic=78609.0

You're gonna eat those words when a bitcent will buy a car.

Well, it is entirely possible that a bitcent will buy a mansion in future.
All I am saying is that just because something is dividable it is not necessarily valuable.

It's a ridiculous argument that I see popping up repeatedly on this forum. Divisibility does not imply value.

Yes it does. The properties of good money are:

• Portable
• fungible
• Un-consumable
• Durable
• Scarce
• Divisible

Divisibility in money does add value to a currency because it's easy to match an amount required value for an exchange.

Okay, this is becoming an exercise in formal logic:

imply
    verb
    °to have as a necessary consequence

Q: Does divisibility of something have the necessary consequence that this thing is valuable?
A: No. There are million things that are dividable, yet are not valuable. Horse shit being one of them.

Everything else is true. Divisibility is an enabling property of money.
Yet divisibility alone will not make something valuable.

OMFG...

Dude, if Bitcoin did not have divisibility, i.e. there were only 21 million coins, and nothing less, they hardly would have the value they have now. People would understand that that is not enough units of currency to support a global economy.

Divisibility ADDS value. Therefore, it has value.

Necessity vs. Sufficiency (http://en.wikipedia.org/wiki/Necessity_and_sufficiency):

A necessary condition of a statement must be satisfied for the statement to be true. In formal terms, a statement N is a necessary condition of a statement S if S implies N (S => N).
A sufficient condition is one that, if satisfied, assures the statement's truth. In formal terms, a statement S is a sufficient condition of a statement N if S implies N (S => N).

Divisibility is a necessary condition, not a sufficient condition for Bitcoin to become valuable.

Somebody draw this guy a Venn Diagram.