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Author Topic: Why a loss in BTC investment could cause BTC price to drop?  (Read 1399 times)
johnyj
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August 23, 2012, 02:03:10 PM
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IMO, since the BTC supply is limited, the price will shoot up when some of the people find that they have lost BTC  Huh

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nevafuse
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August 23, 2012, 02:30:03 PM
 #2

If I lose money in an investment, the supply doesn't change because that money was just transferred to someone else.  Only when bitcoins are literally lost by way of losing the private key or sending to the wrong address (assuming no one has the private key) will the supply fall & prices potentially rise.  There are also several other factors that could counter those assumed effects - like a massive drop in bitcoin usage due to negative events causing prices to drop because people are no longer buying bitcoins.

The only reason to limit the block size is to subsidize non-Bitcoin currencies
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August 23, 2012, 02:35:58 PM
 #3

Exactly there is never a loss of wealth simply a transfer of wealth.   

Wealth transfer: Investor -> The scammer
Wealth transfer: Investors -> Idiot businessman -> suppliers

Even in the real world if you get robbed from a macro economic point of view there is no loss just a transfer.  Now lots of robberies are bad because criminals tend to be bad at deploying capital.  Businessman transfers (involuntarily) $5,000 to a criminal it is less likely the criminal will generate more aggregate wealth then the business owner.  All wealth comes from productivity and criminals tend to not be productive.
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August 23, 2012, 03:25:09 PM
Last edit: August 23, 2012, 09:28:53 PM by 0mzUBBru
 #4

IMO, since the BTC supply is limited, the price will shoot up when some of the people find that they have lost BTC  Huh

I'm not sure.  The price is determined by demand/supply.  If people do not invest in HYIPs anymore (or at least to a smaller degree, which I naively assume), then the demand drops.  This results in a marked correction/price drop.

See my medium-term market analysis.
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August 23, 2012, 11:50:54 PM
 #5

Bitcoin needs to be adopted by more people and seen as more legitimate. Scams and ponzi schemes obviously work counter to that, slowing adoption by new users and eroding confidence at the margins of existing users (potentially a good deal deeper than just at the margins...). I think that probably outweighs the micro market-dynamics, at least after the immediate-term. Scams are not good for the price.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
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August 24, 2012, 01:33:09 AM
 #6

OP could be correct, assuming BTCST was a Ponzi. The 500k coins that people thought they had would only be backed by maybe 200k-300k actual coins. So people thought they had coins, but those coins didn't actually exist. But would people race to re-buy those phantom balances? Some might, but certainly not everyone.
finkleshnorts
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August 24, 2012, 01:48:41 AM
 #7

OP could be correct, assuming BTCST was a Ponzi. The 500k coins that people thought they had would only be backed by maybe 200k-300k actual coins. So people thought they had coins, but those coins didn't actually exist. But would people race to re-buy those phantom balances? Some might, but certainly not everyone.

+1
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August 24, 2012, 12:57:34 PM
Last edit: August 25, 2012, 08:48:53 AM by the_thing
 #8

I am afraid it does not work like this, at least not in the short term.

There are two major effects that result from a huge Ponzi scheme like this.

First, it's a loss of confidence in the market and bitcoin as a whole (although this is not rational at all, since Ponzi scheme does not indicate that bitcoin is untrustworthy)

Second, and more immediate is a short-term increase in supply. What does a scammer do with his ill-gained bitcoins? He tries to exchange them for fiat as soon as possible - so he can disappear without getting caught. So he offers large amounts of bitcoins on the market and price, naturally, drops. Investors would either keep them or reinvest them.

In my opinion, the recent crash has been caused by pirate selling his fortune.


EDIT: corrected supply for demand.

imusify
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August 24, 2012, 05:35:59 PM
 #9

A lot of fiat is a much more difficult to keep secret than a lot of BTC.  There weren't that many coins traded in the crash.  

Transfer coins to a brain wallet and sell a couple grands worth every week.   If BTC keeps rising you essentially have a lifetime annuity (in USD terms).
bitcoinbear
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August 24, 2012, 05:39:15 PM
 #10

Second, and more immediate is a short-term increase in demand. What does a scammer do with his ill-gained bitcoins? He tries to exchange them for fiat as soon as possible - so he can disappear without getting caught. So he offers large amounts of bitcoins on the market and price, naturally, drops. Investors would either keep them or reinvest them.

Should be "short term increase in supply" not demand.

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August 24, 2012, 06:38:09 PM
 #11

IMO, since the BTC supply is limited, the price will shoot up when some of the people find that they have lost BTC  Huh
Pirate has the BTC, the price movement depends largely on what HE does - buying Ferraris = down, holding BTC for a nice retirement = stability/up.

There may be some up movement to BTC if people panic on GLBSE and sell other stocks/bonds and move back into BTC.

Based on how little the Bitcoinica hack did to price I am guessing the effect of Pirate either way will be small.

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the_thing
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August 25, 2012, 08:47:38 AM
 #12

A lot of fiat is a much more difficult to keep secret than a lot of BTC.  There weren't that many coins traded in the crash.  

Transfer coins to a brain wallet and sell a couple grands worth every week.   If BTC keeps rising you essentially have a lifetime annuity (in USD terms).
Hard to tell. Bitcoin is easier to keep secret, but its price is quite unstable. It might be worthless a few months later. If I was pirate, Id make an account in a country with good banking policy (say British Virgin Islands) and exchange bitcoins into fiat via different channels.

Second, and more immediate is a short-term increase in demand. What does a scammer do with his ill-gained bitcoins? He tries to exchange them for fiat as soon as possible - so he can disappear without getting caught. So he offers large amounts of bitcoins on the market and price, naturally, drops. Investors would either keep them or reinvest them.

Should be "short term increase in supply" not demand.
Yes, I meant supply. Thank you.


imusify
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August 25, 2012, 05:27:18 PM
 #13

It might be worthless a few months later.

If you believe that you are basically promoting a ponzi / bubble-game if you promote bitcoin.

Bitcoin is insanely underprice right now and has been for a year or so, maybe because of people promoting such "this is actually just a ponzi scheme or bubble of sorts, not a long term project/thing" ideas.

Every single bitcoin that you part with in return for X value from someone else is only ever (in your lifetime anyway) worth less than X if you yourself are defaulting, scamming, giving someone a "token of value" that you do not plan to honour when it comes full circle back to you.

Basically if each individual is a scammer planning not to return value equal to what they accepted for the token when the token having gone around comes around then yes it is a scam and each individual who plans not to honour the token they give out when it comes back is part of the scam.

Many people are basically refusing to part with bitcoins simply because such scammers are offering such little value for them; it is insulting how puny the value they offer...

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