Right now it seems like everyone is hoarding...

[fwho]

...what happens when an economy comes into play? With all these new merchants starting to accept bitcoins, and the push for an economy, once they are actually being circulated what happens to the price?

[notig]

I read that the guy who owns bitcoinstore.com is actually keeping the coins lol (rather than sell them immediately through bitpay or coinbase)

[fwho]

He would have to repurchase inventory sooner or later, so that would be one hell of a faithful investment.

What I am really looking at though, is once people are using them, once they are being passed back and forth and are easier to get, will less people be buying them and result in a price drop? Will more people buy them to come into the market?

[mccorvic]

I think a lot more people are spending now than any other time before.  The different charts for "bitcoin days destroyed" generally support this theory.

[Littleshop]

I think a lot more people are spending now than any other time before.  The different charts for "bitcoin days destroyed" generally support this theory.

People are spending.  I am spending more USD wise with BTC and more is being purchased at my store USD wise with BTC. 

[fwho]

So the more the economy grows, and the more that are spent the higher the price?

[mccorvic]

So the more the economy grows, and the more that are spent the higher the price?

Yes. Velocity can increase prices.  I typed a whole paragraph trying to explain it, but decided I'd leave it up to someone who would do a better job

[lassdas]

it seems like everyone is hoarding...

I always thought prices could only change (up or down doesn't really matter) while trades are happening,
now you come and say everyone is hoarding.

Where does all the trade-volume come from, if noone's selling?

[Stephen Gornick]

...what happens when an economy comes into play? With all these new merchants starting to accept bitcoins, and the push for an economy, once they are actually being circulated what happens to the price?

It is likely that the current level of speculative interest is betting on there being many millions of dollars worth of transactions from bitcoin merchants occurring each day.  We are yet many millions of dollars per day worth away from that occurring.

i.e., Gaining significant traction doesn't necessarily boost the exchange rate further, it simply validates that this current valuation level was warranted.  And if bitcoin doesn't reach that level of economic activity, and hope is lost that it will anytime soon thereafter, then this current valuation is too hot.    

Or, bitcoin hits the target of doing many millions of dollars worth of transactions per-day (e.g., $5 million per-day is nearly $2 Billion in economic activity per-year), and the expectations then become that it will grow to a target ten times that.   Then that's when the current valuation is nowhere near grand enough.

At some point here there needs to be a sanity check, like maybe a formal analysis on how much BitPay and WalletBit are really doing and extrapolating from there how far short Bitcoin still is versus the $5 million (or whatever) a day of economic activity target level.

[johnyj]

This is very natural due to the clear uptrend of price development. Soon those merchants who are willing to accept bitcoin will find out that they barely even receive an order with bitcoin payment

And this is anticipated long time ago. Soon bitcoin will become a new currency traded at worlds largest currency trading platform, and the real delivery will become less and less

[Stephen Gornick]

This is very natural due to the clear uptrend of price development. Soon those merchants who are willing to accept bitcoin will find out that they barely even receive an order with bitcoin payment

Not because the price is going up though, but because the level of commerce started out small and growth comes gradually.  The exchange rate has nearly tripled in 60 days, but gaining three times as much economic activity will maybe take half a year or perhaps some other much longer period of time.

But the desire to use bitcoins for spending is there.  For instance:

We opened the site up at Midnight EST last night, and by 9am EST we had over 100 of you place orders. By noon, that number exceeded 200 orders
[...]
We brought in so many unexpected orders, so quickly, that we had to temporarily remove the ordering function!

- http://www.reddit.com/r/Bitcoin/comments/19oqir/

[fwho]

it seems like everyone is hoarding...

I always thought prices could only change (up or down doesn't really matter) while trades are happening,
now you come and say everyone is hoarding.

Where does all the trade-volume come from, if noone's selling?

That is why I created a board posing a question rather than a statement.

[BkkCoins]

People are selling. You can't have a trade without both a buyer and seller. So it may seem like no one is selling but that's obviously not so. The price moving up means that buyers are more eager to buy than sellers are to sell. This is due to recent changes that make buying easier ( = more buyers) and news that interests more people in buying ( = more buyers).

There's also a change in the dynamic. Whereas before buyers would verify at MtGox and transfer money to buy now people sign up at Coinbase and buy at a fixed price. This leaves Coinbase to source the bitcoin to fill those orders. So people aren't making the same kind of buy-sell decisions as they were when interacting with the market themselves.

[jubalix]

[1] mass flow of money money velocity for the plebs, (but it mass flow really....)

[2] and as more is horded that puts price up an inversely proportional amount has to be spent on transactions of the same value,

so you will down to increasing velocity for liquidy rather than market depth.....as VH x 1/VH = 1.



so you will need to see a higher frequency trade if the usage expands....not depth of market transactions....but really that always the case...as the VH x 1/VH = 1

makes sense every one is passing the same thing round faster, it just its all in little bits, but take a step back and its just on thing being passed around

[davecoin]

He would have to repurchase inventory sooner or later, so that would be one hell of a faithful investment.

What I am really looking at though, is once people are using them, once they are being passed back and forth and are easier to get, will less people be buying them and result in a price drop? Will more people buy them to come into the market?

I would assume he takes a steady payout to cover at least a part of his goods.

[Mageant]

The most valuable utility at the moment for Bitcoin IMHO is as a storage of value.

That's why people are "hoarding" (actually saving).

Gold is also priced very highly but rarely used commerically.

Bitcoin has about the same usefulness as gold as a storage of value, but is actually easier to spend when you don't want it anymore.

So it is reasonable for Bitcoin to have a high value even if it not used a lot in commerce.

[chandler22]

I'm not buying, I had about $10k worth of Bitcoins @ 10 usd and I've been selling them off for Amazon gift cards since the price was $20 a btc, then $25 a btc etc.

Watching the price and fluctuation history, I think I've made a sizable return on my investment that I don't have a problem on 'losing' money when Bitcoin hit $50 earlier (and shortly retreated), I sold the rest out (yesterday and today - about another 5k worth).

This kind of fluctation and price increase is pure madness. And a lot of people are going to get burned, and a lot of people are going to make some money.

I'll play it safe. New iMac here I come.

[chandler22]

Looks like I cashed out the rest at the top. Watching this madness right now... wow.