I'm sorry, that was a joke. This is not:

Lol, you can pound your fists all you want, but this is what your public sees:

Yeah, because measuring a $6 drop from $30 to $24 equally to a $1 drop from $5 to $4 makes great sense in a crashing market for people who just "want to believe".  When are you idiots going to stop picking the data you want to match your emotional desires and start facing reality?

Bitcoin is inflationary right now?

Good luck convincing the Crypto-currency world to change the name to crypto-method-of-payment. People want to use BTC as a currency. A real one. Not a commodity that has to jump through at least one exchange hoop for every single transaction. That hoop has to be less annoying than using a credit card online, and currently, it's not. It's lucky the novelty and ease of use for grey/black markets has sustaining power. Otherwise, you wouldn't see this thing last a week.

Ah, as a medium of exchange, it has certainly disappeared almost entirely, unless someone wants to bargain with it. As a commodity, it still exists. I was referring to volatility's role in currency, not commodity.

I need to read up on this price indexing system, to really understand what's happening here. I am having trouble imagining exactly how these would work, even with the explanations above. I'll be right back.

Edit: So let me get this straight. Reference currency is defined by a set basket of goods, and an index shows currency exchange rates against this reference currency. So in this case:

If I had 1.05 dollars or .17 btc, I could purchase a 1 RFC priced item, correct?

Question:
What determines these USD/RFC, BTC/RFC rates?

a) If rates are determined by sellers: then you have nothing new. Pricing responds to demand and increase/decrease of currency quantity just as before, and that volatility associated with this helps you decide which currency (in relation to RFC) is the most stable for what you can get with those goods. I'll leave out the simple example unless it becomes clear you don't know what I mean.

b) If rates are determined by central authority: ex: 1RFC = 1USD = 1BTC = 1JPY, you now have a complete Soviet-esque command economy. You are not actually suggesting this...?

Wait, so what you're talking about is exactly what I'm seeing on sites like the Silk Road, with one more hurdle: summarize prices as an "index", with exchange rates into each currency posted instead of just USD. So basically, a price in each currency based on current exchange rates between them...how is that any different than what we have now? I mean, it still requires you to pay with the currency you hold. If you hold one that fluctuates wildly with respect to others, you'd dump it in exchange for something less volatile.

I'm not sure what you think is in the realm of reality about the existence of volatility; What, exactly is flawed about the fact that relative to what you can get, goods-wise, BTC is more volatile than USD?

I'm talking about the natural tendency for mediums of exchange to disappear as such because they are more volatile, relatively, to others. It doesn't matter a whit whether it's backed by Mariah Carey's ruined tits, my pubes, or artificial diamonds. The more volatile "currency" dies in favor of the less.

It just so happens that Fed-backed USD has a centralized control on it's volatility, whereas gold does not. This has potential problems, but is far beyond the scope of this discussion. Fact is, BTC sucks because of it's volatility relative to USD, whatever the reasnos, and people are choosing not to transact with it for this reason, among others.

Do you disagree with this?

What would the unit of exchange be for these "Index Prices"? Interesting idea, trying to imagine the logistics.



Reasons for transaction failure matter. I was quoting a transaction that was cancelled in part because of a fear that the unit of exchange for the transaction, one that he would be holding at the end, would be worth less than it was at moment of sale.

I'm not pointing to all failed transactions in general as a failure of bitcoin; only that this particular transaction (and many others, from anecdotes and the existence of web software to instantly update BTC prices to USD), bitcoin's volatility is an extremely important barrier to move it into the world of "currency". Now, it's a fancy commodity easily moved about the net semi-anonymously. Not much more.


If volatility is extreme enough that it requires transfer into, a goods/service exchange, and then transfer out of BTC for every transaction ASAP, doesn't that speak volumes about how useless (and costly, remember fees) it is as a "currency"? How could this be less complicated and less expensive than using paypal, not to mention faster?

One of the hallmarks of the adoption of a useful currency is that people don't worry about its value at $5, $10, $100 investments (USD used for comparison). You ever left $100 in an interest-free bank account, and worried terribly about inflation/deflation? No, because it's immediate use as exchange isn't particularly vulnerable to crazy, nation-wide price changes across the board (i.e. serious currency value changes). Not true with BTC so far.

Yeah, the first thing that comes to mind when you say this is the poster leaving. I mean, ususally, when someone wants to disassociate themselves, it's because they've made themselves look stupid. Stopping yourself from entering a discussion you no longer like is adult, locking the thread is for children: "lalalalalalalalalala I can't hear anything you're saying!!!".

A agree with the obsolete usage, but that's easy enough for mods. I know many forums out there where locking is not allowed in places where argumentation is high and attitudes are unique; too much pressure to censor in those places.

You're trying to change the subject by pulling an old elasticity switcheroo; regardless of the features of goods, all else being equal, if the price shifts significantly because the value of your currency shifts, you'll opt for a more stable currency where possible. I would also expect that consumer behavior would change as real prices change, whether that's due to goods shortages (your fruit example), or a change in the underlying value of the currency. Simple fact, people will buy less gasoline (or switch to stable currencies to pay for it) as its real cost increases. Point being: BTC will not be elevated to even a useful currency until price fluctuations tame down. This is really holding it back, and why I rarely see raw transactions in BTC (especially large ones) without some pegging to a USD/BTC ratio.

...

It's obviously not some key target, it's relative (to, again, the goods it can buy), which is how Gresham's Law works. More stability is a better feature for a reliable store of value, a major component of having a useful currency.

Remember what we're talking about here: USD prices increase 3% per year. We've seen 600% swings in BTC value over 3 months. Tell me which one you'd want to use to buy your food: The one that gets you a loaf of bread yesterday, today, and next year for somewhere around $5-$5.15, or one that gets you a loaf of bread yesterday, today, and next year for anywhere from $.16-$30?

Well, the USD is decreasing (or increasing) with respect to other currencies a lot, but not in comparison to the local goods it can buy. As I have seen so far, BTC merchants moving serious volume will post exchange rates to USD because that's the measure of stability with respect to the goods they sell. Until that changes, BTC will always be second string (from a US perspective. The perspective that has the largest ramifications for transactions globally).


This is an interesting angle. But I expect that volatility still plays a major role, here. In places where bitcoin is actually less volatile with respect to the local goods it can buy, it's likely more useful as a currency than the native.

Note I'm using 'local' to mean 'accessible'; the medium of exchange for your daily needs like groceries, via grocer or Amazon Fresh, will reflect the most consistency in prices of those needs.

I guess I don't understand the distinction from your use of "method of payment" and any other commodity that can be traded. If I give you a sexy portrait of Mario Lopez for whatever it is I want from you (already a losing deal on my end), is that not "a method of payment?" Or are you referring to the transaction process (i.e. a physical handoff compared to an internet transfer)? If you're saying that Bitcoin has cornered the market on the latter, I would beg to differ. I manage to purchase things easier and faster with USD over the internet.

Basically, the one key element besides wide adoption that really solidifies currency is relatively stable value. My last attempt to purchase something with BTC was nullified because of it's volatility. I think that's a sign that BTC is nowhere near a "currency" at this point.

Thoughts?

We have heard this argument before, but I had my first encounter with evidence (n=1, so far):


This was initially a transaction offered in these forums in BTC that fell apart for the reasons stated. If you didn't believe that volatility was an important factor, here's one example proving otherwise. Largest hurdle? Maybe. Hurdle nonetheless? Absolutely.

Are you kidding me? You have to be joking.

Like this a lot, and your charts. Nice, dude.

Still, I have a lot of skepticism for one person toying with the market for profit. I can think of a massive number of people with lots of bitcoin wanting to sell that aren't intentionally trying to mess with the price. I think Revalin's comment makes this even more plausible.

Yeah, have a re-look at your posts, and tell me you weren't, in general sentiment, attempting to tell me how my boilerplate, narrowly defined economic arguments (in response to a single premise in the OP, no less) were moot because "BUT THIS IS BITCOIN!".


I'm assuming this is directed at me and not fivebells, because that would make the most sense. I directed none of those points to you, only Crypt_Current, who presumably wanted to know why I thought bitcoin would never exist as a useable currency without speculative behavior in any sense, regardless of exchange venue. I threw that libertarian bit in there as a joke.

Seriously, old_engineer, you're just reacting to my abrasive call-out that you just can't read (or quote) appropriately. I don't disagree with a single thing you've said. You're still doing a terrible job of showing me you can "read good", though. See fivebells, below, for not even realizing you were quoting the wrong dude as the nail in the coffin: you dumbasses couldn't recite the alphabet.

I am tired of being a jerk, so I'll just explain normally.

I was responding to two individuals (old_engineer and fivebells). I was pointing out that their general sentiments ("You can't talk about economic rationality with bitcoins! Bitcoin is about faith and love and backless currency and...!") was a joke because it 1) flies in the face of both libertarianism and 2) you can't really have a currency as bitcoin purports to be without an exchange market and arbitrage.

I know at least old_engineer wasn't being that literal; they were just making counter-arguments about other valuable uses and utility gained outside of profiteering. None of which I dismiss. I was just calling to attention the general attitude that many have here: that speculation is undesirable. My argument: unavoidable (and read better, please).

I actually only use bitcoinica. There isn't really anything worth purchasing with BTC at the moment for me, and it's volatility makes using it as a currency pretty dangerous for my bank account. 

Love to hear how you expect a new currency to take hold if you can't exchange it anywhere. And I think it's pretty obvious that as soon as there's an exchange, there are people willing to take advantage of arbitrage.


No deduction necessary, I was stating fact.

Indeed. My displeasure stemmed not from your inability to understand after all, but rather your choice to ignore the piece of the OP I was working from. With a conditional statement. I'd like to hear more about the above, though. Lots of room in this debate for whether or not it's actually profitable.


Lol. You do realize you're in the "speculation" subforum? Just curious if you can even read the big words at the very top, now.


Again, without a basic understanding of utility, you have nowhere to stand arguing in this subforum. Go look it up, seriously. I have no problem with ulterior motives besides profit for miners. I was only responding to the (OP's presumed, hypothetical) factors driving them. Your reading comprehension is called into question, once again.


And there are people like me who could care less about its success as long as I'm betting on the right side for profit. I see a large, generalized outcry about the "commoditization" of bitcoins around here, as if the existence of transactions outside goods/service exchange is the demon of your pet project. 1) Not very libertarian of you, and 2) not very possible.


"I have no overhead so I always make a profit." i.e. "I steal my power, so who cares?!"

And he means the longer-term spikes. Basically, I learned cheaply that Bitcoinica isn't worth short-term trading because of volatility. Grab a position that you like and hold onto it, and don't over-leverage so you have control over when you come in and out of positions. Think a bit longer term with Bitcoinica.