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The value of bitcoin is highly speculative and good points have been made. However, I also want to point out that the number of total bitcoins ever to come into existence still has not changed (approx 21 million). The number of coins mined will be halved by the end of the year. Only 347 days left.
There are a ton of short term speculators here. Some people are here for the long term so if you truly believe bitcoin will be adopted then any buy in the beginnings of bitcoin is a good buy.
There are a ton of short term speculators here. Some people are here for the long term so if you truly believe bitcoin will be adopted then any buy in the beginnings of bitcoin is a good buy.
There is always the risk that someone holds millions of them and might need some money. I think we've become fairly accustomed to the idea that this isn't happening - but there's no way to know for sure. Someone who holds a million bitcoins need only drop 20-50k of them at a time to clear out much of the orderbook (like we saw yesterday).
One thing I find incredibly interesting is: http://ecdsa.org/stats.html
Look what happens to all the coins mined in 2009 as you pass your mouse across June 2011. I bet only 10-15% of them move. What about the other 85-90%? That's a serious question to ponder. They are virgin coins that not only have never been traded, they have never been used for anything! They still belong to whoever mined them. Those coins are out there whether we like it or not. Either whoever holds all those coins died and took them to their grave (unlikely), or only needed to sell a tiny percentage of their holdings to clean house. Others have suggested that people mined those coins and forgot about them or didn't care. Even if that's 90% true (it almost surely isn't), 10% of a million coins is quite a load to be able to dump even in this market...
I've griped about these early coins in the past, but feel comfortable that they'll come out slowly in due time if Bitcoin grows organically to the point of ubiquitous adoption. Whoever holds them will be damn rich, and the cost of them becoming rich will slowly be spread across all of the people adopting bitcoin to the point they won't even notice. BUt if anyone decides to drop a few million dollars today and wipe out all the asks on the orderbook, feeling like he "0wned" Bitcoin, I am sure whoever has all those sleeping coins is going to have a hard time not being tempted to cash in. Why woudn't he - his risk is minimal - drop 5% of his coins and take 50% of the orderbook. Someone with a million dollars to throw at Bitcoin probably is financially sophisticated enough to see that risk just by comparing the depth of the orderbook with the total number of bitcoins in circulation, which is why I am not counting on it.
Someone with a big load of dollars needs to wait for another bottom before considering a major buy, in my opinion. Otherwise they are essentially gambling that there will be imminent news out of left field that will bring them sudden luck - which could always happen - but not predictably enough that the odds would be any better than a typical wager at a casino.
The people who set the bottom will be the ones with lots of dollars to draw a line in the sand, and the ones with lots of Bitcoins who will decide whether to take the dollars and run, or not. Those people (presumably) don't know each other, so in effect, nobody can know where the real bottom is.
If all speculation were taken out of the picture, I might guess that the real Bitcoin economy that depends on Bitcoin to function to exchange goods and services (silk road, etc.) needs only about a million dollars to actually account for the goods and services exchanged within, which would correspond to a bitcoin price under 13 cents. That's what I consider an absolute floor (that we'll never reach). $2.00 is close, but there's still probably room for a lower bottom.
Hmmmmm.
Those of you worried about all of the bitcoins mined at difficulty 1 need to take a look at this graph.
http://ecdsa.org/stats.html
What you'll see, is that the vast majority of those coins haven't been touched. Not when bitcoins were $20, not when they were on their way up, not when they were on their way down. Also, you'll be able to see that most of those coins didn't get produced at a rate of 50 every 10 minutes.
The more coins that get mined, the less they matter. Those are what, a million coins? Two million? As time goes on, and we're cranking out a million new coins every few months, those first coins matter that much less.
Possibilities that have crossed my mind include:
1 - whoever owns them has so many, knows that dumping them would crash the market, and has enough faith in bitcoin's future to not blow his load all at once. Is waiting for the big long term payoff, a $30 bitcoin price is maybe small potatoes in his vision, or is incentive only enough to dump a few.
2 - many of them may be lost forever.
3 - many of them must be owned by Satoshi, who maybe died, or perhaps is also smart enough to know that moving all of those early coins will give us clues to his existence and deliberately spends only newer coins.
I once feared that those coins would come out and crash the market - I'm not so worried at this point. If someone has them and is able to spend them, I trust that whoever's got them isn't going to crash my bitcoins to pennies with them, and has an interest in seeing Bitcoin's long-term longevity. (and if they do, I'll be standing by to buy many of them up for pennies).
http://ecdsa.org/stats.html
What you'll see, is that the vast majority of those coins haven't been touched. Not when bitcoins were $20, not when they were on their way up, not when they were on their way down. Also, you'll be able to see that most of those coins didn't get produced at a rate of 50 every 10 minutes.
The more coins that get mined, the less they matter. Those are what, a million coins? Two million? As time goes on, and we're cranking out a million new coins every few months, those first coins matter that much less.
Possibilities that have crossed my mind include:
1 - whoever owns them has so many, knows that dumping them would crash the market, and has enough faith in bitcoin's future to not blow his load all at once. Is waiting for the big long term payoff, a $30 bitcoin price is maybe small potatoes in his vision, or is incentive only enough to dump a few.
2 - many of them may be lost forever.
3 - many of them must be owned by Satoshi, who maybe died, or perhaps is also smart enough to know that moving all of those early coins will give us clues to his existence and deliberately spends only newer coins.
I once feared that those coins would come out and crash the market - I'm not so worried at this point. If someone has them and is able to spend them, I trust that whoever's got them isn't going to crash my bitcoins to pennies with them, and has an interest in seeing Bitcoin's long-term longevity. (and if they do, I'll be standing by to buy many of them up for pennies).
If someone drops 50k to 100k coins they will get snapped up.
Check back in a week and see if you are still saying boo hoo. I'm holding mine.
Check back in a week and see if you are still saying boo hoo. I'm holding mine.
