brick and mortar adoption results in bitcoin price drop?

[crimsonskies]

or : using bitcoin in the market place results in its drop in exchange price?

I think that few people would argue that the recent increase in bitcoin's market price has been driven by speculation:  mainstream news begets awareness leading to interest and then entry into ownership.  More buyers = upward price movement, feeding back into increased speculation interest and further price rises.  This fact seems clear enough when comparing the charts that track bitcoin use in the market place (brick and mortar) vs. volume in the exchanges (http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/12/20131205_btc2.jpg).

So, a rise in the price of a bitcoin encourages users to hold and a stable price or falling price encourages users to spend.

Also, when reading opinions speculating on the going forward value and adoption of bitcoin, the consensus seems to be that the success or failure of bitcoin as a generally utilized currency will depend upon its adoption by the wider brick and mortar market place.  Not much use in a currency that cannot be used as a means to buy real world necessities (or luxuries).  Given this widely held opinion, bitcoin enthusiasts are exited when the brick and mortar announce acceptance of bitcoin in their stores because this confirms the practical use of coins and their eventual practical utility (unlike tulips).  Indeed, news services like Coindesk frequently announce bitcoin adoption by major online stores, so much so, that these types announcements outnumber others by wide margins lately.  And given the meteoric rise in bitcoin price (and hence the total market cap), it makes sense that stores like Overstock accept bitcoin:  a new large market makes for increased sales and profit.

So, more and more stores are accepting bitcoin.

Yet, any fool who looks at the historical prices of bitcoin concludes that it is a volatile market and for a merchant operating on thin profit margins, converting bitcoin to fiat as quickly as possible is the safest course of action.  Indeed, many recognize this need and have created services to make this process nearly seamless for less tech savvy merchants.

Recently the price of bitcoin has been relatively stable hovering in the 850/800 range (most of January).  Volatility has been low (relatively speaking) and prices have been stable or slightly downward trending.  This fact means that the speculators are discouraged and those users that acquired their coins in the past (whether it was early in 2013 or before) now have a huge asset base in which to acquire actual useful real world items.  Couple this fact to the large increase in merchants who are accepting bitcoins (and exchanging them for local fiat) and we can see how bitcoin use as a currency might outstrip bitcoin purchase as an investment leading to a downward trend rather than the expected upward trend.

In addition, as far as i can tell, the smart VC money (and lately there is a *lot* of interest here) isn't going into purchasing bitcoin as an investment, but rather, into businesses that can take advantage of users who already posses coins.  And it seams reasonable to assume that once these coins are acquired, they are converted to fiat and used for investment elsewhere or simply to pay for ongoing expenses (this being particularly true for the mining hardware companies).

Speculation waning, conversion to fiat increasing and we have a general downturn in price.

Will this feedback loop further scare away the speculators and encourage the real world use of coins until a new stable low has been achieved?

I think so.

And until entry into this currency becomes less intimidating for the average user and until even more merchants allow for bitcoin's use, i just don't see bitcoin rising anywhere near the 1000$ mark we saw in December.


...oh the wailing of new miners becomes audible even from afar....

[odolvlobo]

or : using bitcoin in the market place results in its drop in exchange price?
...
Speculation waning, conversion to fiat increasing and we have a general downturn in price.

Conversion to fiat is preceded by conversion from fiat, so the entire cycle is neutral, not down.

Also, merchant acceptance pushes the price up because it raises adoption and more people acquire and hold bitcoins in anticipation of spending them.

[crimsonskies]

Conversion to fiat is preceded by conversion from fiat, so the entire cycle is neutral, not down.

Also, merchant acceptance pushes the price up because it raises adoption and more people acquire and hold bitcoins in anticipation of spending them.

Conversion to fiat is not always preceded by conversion from fiat.  In fact, i do wonder especially lately if, outside of exchanges this is even true at all. Why buy bitcoin at market prices (+fees) only to spend them with merchants who would accept the original currency? It seems far more likely that coin transferred to merchants come from miners who acquired their coin sans fiat, or from those who purchased coin at very low prices some time ago (which makes it a very non neutral exchange).

Merchant acceptance and rising prices are a chicken egg question, at least in the near term, and looking historically at the last few months, i'd argue that it was the higher prices that caused merchant acceptance, not the other way around.  News of merchant acceptance builds confidence and drives speculation, but at least for now, i fail to see why *anyone* in the first world would buy bitcoin now in order to have access to merchants... edit: unless said merchant was selling illeagle goods.

They might buy bitcoin to transfer wealth across international boundaries, but not to make mundane purchases.

There needs to be a clear and present advantage for an average human (other than gold rush speculation) in order to adopt this currency and further, acquiring and holding bitcoin needs to be made easier.  I'd like to see the VC money go into software to make this easier, rather than stuff like exchanges that simply make money off the existing user base.

[pletharoe]

+1

[_Miracle]

Exchanges need to be secure and stable.
Confidence and lack of is the reason prices are dropping.

When who is "adopting" bitcoin is no longer news and it's more consumer friendly...that's mainstream.
Every bit of news will have an effect on price (I like that for now).

[slangrd]

+1 good 

[crimsonskies]

Exchanges need to be secure and stable.
Confidence and lack of is the reason prices are dropping.


Every bit of news will have an effect on price (I like that for now).

As a former broker, your interest is speculative, yes?

You believe that confidence (or its lack) drives price, and news drives this confidence in both directions.  What recent news do you think has been driving the confidence down, do you think?

As far as i can tell, the majority of recent news has been either neutral or positive.  I fail to see what new information has been recently causing a downturn in confidence other than the lack of price movement in general.

I also wonder if the US gov has started dumping their confiscated silk road coins...

[_Miracle]

Exchanges need to be secure and stable.
Confidence and lack of is the reason prices are dropping.


Every bit of news will have an effect on price (I like that for now).

As a former broker, your interest is speculative, yes?

You believe that confidence (or its lack) drives price, and news drives this confidence in both directions.  What recent news do you think has been driving the confidence down, do you think?

As far as i can tell, the majority of recent news has been either neutral or positive.  I fail to see what new information has been recently causing a downturn in confidence other than the lack of price movement in general.

I also wonder if the US gov has started dumping their confiscated silk road coins...

Real Estate Broker origanlly from Silicon Valley. My interest is in the technology, the currency and the potential for this "little experiment" to even out some long standing issues in our financial/money systems.
"Real Estate Broker" 2005+ in America, in California, I got to see the banks implosion while standing in them. Got to listen to the endless droning of B.S. news feeds to the public while people lost their homes, business, life savings, (livelihoods). Banks were not moving by early 2007 and as we all headed over to "the drop zone" without a seatbelt (and "we" refers to consumers because banks had their nifty government seatbelt protection ;-).
Banks were slow to get deals closed or negotiate shorts...they didn't adapt or move their sludgy, over-bloated arses.....because they didn't have to. They should have failed/restructured with the rest of us saps who bought into the American Dream...no?

So here I am an American and we say that we are the land of the free...we are except the continuing shift away from "For the People by The People".
Do I understand Russia and China trying to shut down something like bitcoin? Yes, let 'em try.
America? Not acceptable. Bitcoin needs to run its natural course and help move us beyond this poorly and overly constructed thing they refer to as an economy.
Bitcoin puts our American ideals to the test...let's do this ;-)


What do you mean "no news" ? Have you missed the regulatory meetings or Gavin and his recent talk with (Foreign relations...someone help me out with that name). Mt.Gox (AGAIN) cutting off access to peoples money, coinbase's security issue.
I hope bitcoin stays. Do I speculate on price? Yeah, 10,000-100,000 makes more sense to me if it is to be widely moved around the world, A million dollar transaction can't be such a big deal to a currency (or its to be a commodity).

Bitcoin is becoming more reality and less "get rich quick". It is not average consumer friendly, maybe it never has to be and maybe it does. We'll see.
I'm less speculative and far more interested.

[crimsonskies]

Not acceptable. Bitcoin needs to run its natural course and help move us beyond this poorly and overly constructed thing they refer to as an economy.
Bitcoin puts our American ideals to the test...let's do this ;-)

Bitcoin is becoming more reality and less "get rich quick". It is not average consumer friendly, maybe it never has to be and maybe it does. We'll see.
I'm less speculative and far more interested.

I did mention that much (i said most) of the news was either good or neutral.  I did not mean to claim that it was devoid of bad news, nor do i feel that Gavin Anderson's discussion with the Council on foreign relations (http://www.coindesk.com/gavin-andresen-governments-control-bitcoin/) should be considered "bad" news. 

There is a bit of a contradiction between the statements of your that i quoted: "help us move beyond" and "not average consumer friendly" are a bit at odds with each other.  I agree that finding a way to bypass the banking system would be a great advantage to the average human and that something like bitcoin might achieve that someday, but not without a fight, and not without a huge restructuring of the way government debt works.  You do realize that banks are an integral part of Government financing through bonds, right?  Gov needs cash -> sell debt to the Fed (at a discount) in exchange for cash -> Gov gives cash to employees and contractors -> employees give cash to banks where it is multiplied through fractional reserve -> banks use cash to buy more bonds.  T'izz a closed system, all of it hinging on the Gov's ability to pay back debt in the form of bonds.

It's crazy and unsustainable without controlled a positive inflation and constant GDP growth.  And since infinite growth in a finite system is not possible, then at some point, the house of cards colapse and something new takes its place.  That something may very well be bitcoin, or more likely, some evolved version of bitcoin.

In the near term i see something more along the lines iterated by Mr. Anderson:

“If Bitcoin turns out to be a miserable failure, but it does encourage some government to realize that our payment systems are broken and archaic, and some country decides we’re going to make a payment system for this century, I think that would be a huge success.”

Bitcoin and its family of altcoins are a fascinating subject and watching the development, both in terms of the 'gold' mining craze and the introduction of a decentralized, public ledger trading system have me captivated.


the best show in town.

[_Miracle]

crimsonskies, I've explained my opinion, you seem quite comfortable interpreting it...carry on.