stabilizing bitcoin market

[aurora]

is it ever possible? market is so small (100mil usd) Talked to wellsfargo broker who told me that if market is so little stabilization will never happend.

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[Monkey1]

The market will not always remain this small.  Bitcoins are being mined constantly until we reach the predetermined cap of 21 Million.  The price should also increase over time as the use of BTC spreads.  Therefore the cap will steadily increase.

[SuperHakka]

Why is the 21m set in stone. Is it possible protocol could be modified to make the total amount of BTC open ended but growing slowly at a predictable pace?

[rynmln]

Why is the 21m set in stone. Is it possible protocol could be modified to make the total amount of BTC open ended but growing slowly at a predictable pace?

I feel like that would take away from part of the reason for bitcoins. 

[Badonkadonk]

meh, does it matter what a bitcoin is worth in usd / euro? heeeeellll no imo, remove "real" currency allready, make the banks into homeless shelters or something usefull!
and shut down the fed / world bank! rawr!!

edit:
hello btw, long time forum reader / new poster here

[Stephen Gornick]

is it ever possible? market is so small (100mil usd) Talked to wellsfargo broker who told me that if market is so little stabilization will never happend.

Most people don't mind it being unstable, just as long as it keeps going up.   

Other markets have financial derivatives that help to resist rallies and to give support during declines.  Bitcoin does not yet have these innovations, at least not like other commodity markets, thus the degree of volatility is acute.

For instance, for whatever reason there was a ton to buying in late July, and through August.  One possibility is that a fair amount of the demand was for bitcoins for "investment" into what was ultimately appears to have been just a ponzi.  Mt. Gox lists about $5 million dollars worth of deposits in a month, so if the was the expected million dollars of fund inflows related to that one "investment", that could have been the driving force for a rally.  Instead of a rally dissuading buyers, speculators pile in and the rally turns into a bubble.   Without a method for other speculators to go short, the rally continues until some event causes the direction to change. 

There is one option available -- MPEx offers BUY and CALL options.  And it got widely used during last month's rally -- MPEx had a record month in terms of the volume of options traded.  So the rally might even have gone higher without the resistance introduced thanks to the options.
 - http://en.bitcoin.it/wiki/MPEx
 - http://polimedia.us/bitcoin/mpex.php

A relatively new offering made available is the ability to buy futures contracts on ICBit.se.   There too, speculators can bet against bitcoin if they choose.  There is even margin available giving leverage to traders.
 - http://www.ICBit.se

[Monster-Ant]

Explain to me, please, why everyone thinks that having a limited number of bitcoins, EVER, makes it somehow desirable.

[Mandelbrot]

If you don't like the soft-cap, you can always mine an un-capped chain like Geistgeld or Tenebrix, if they're even still around.

[Monster-Ant]

Like has nothing to do with it. I want to know WHY it is supposedly a good idea.

[FreeMoney]

Explain to me, please, why everyone thinks that having a limited number of bitcoins, EVER, makes it somehow desirable.

Bitcoin will always be the crpytocurrency with 21M cap and set rate. If anyone wants something else (and a few do) they give it another name so as not to appear or be fraudsters. Bitcoin is what it is and a lot of people understand and trust it and desire it.

People don't desire the currencies with holes in their tanks nearly as much.

[Monster-Ant]

Explain to me, please, why everyone thinks that having a limited number of bitcoins, EVER, makes it somehow desirable.

Bitcoin will always be the crpytocurrency with 21M cap and set rate. If anyone wants something else (and a few do) they give it another name so as not to appear or be fraudsters. Bitcoin is what it is and a lot of people understand and trust it and desire it.

People don't desire the currencies with holes in their tanks nearly as much.

That still hasn't explained why having a set cap on your currency is such a good idea.

Even money backed by a gold standard has influx of new gold from mining as well as fluctuations on the gold market which can have drastic repercussions on the currency.

HOW and WHY is having a 21M cap and a set "mining" rate on bitcoins a desirable thing?

[odolvlobo]

Explain to me, please, why everyone thinks that having a limited number of bitcoins, EVER, makes it somehow desirable.

The fixed number of bitcoins makes inflation impossible. Inflation is a bad thing, despite what politicians may want you to believe.

[Sk1p]

Maybe they should institute some kind of reserve that protects us from a fixed commodity, and we'll bring about inflation to protect the stockpile value of BTC... Who knows, maybe even allow them to print more BTC. You know, to protect the people, and stuff...

Dry humor. However, the existence of a cap is what allows this "BTC" to be traded as currency. If there were infinite amounts of BTC, and people knew that no matter how long they mined, they would never reach the end, no one would do it. In any financial system there will be the top percentile of "traders" and "miners" who have the wherewithal and know-how to master any scenario like this.

There will be other unregulated internet currencies. These are the times, the internet is life, and people will continue to make the best use out of it, especially to make a buck.

[Monster-Ant]

Because money that's worth less every year is a pain in the butt.

That's it? It's "a pain in the butt" is the whole reason?

Bitcoin has much in common with gold from an economic point of view, should we make more gold too?

We mine more gold all the time.

Gold is subject to artificial market manipulation, as we've seen in the past.

Which can destabilize not only the price of gold, but an entire economy, unless the government puts into place controls. (Like the old: "Illegal to own gold beyond X" that used to be in place fairly recently in history)

Hell, gold based economies are VERY subject to outside controls and manipulations.

So WHY is it bad?

The fixed number of bitcoins makes inflation impossible. Inflation is a bad thing, despite what politicians may want you to believe.

Actually, politicians say that inflation is bad, despite the fact that inflation of the cost of goods and services occur due to market forces as well as government stabilization of the money.

Banks and corporations with vast reserves of wealth want no inflation. That way the money they have will never get worth less, which doesn't give them reason to invest and spend and in general put that money into the economy. Now, the lack of that wealth means money is more scarce, which pushes up prices.

Deflationary or static currency is actually a bad thing, economics 101 teaches that.

So why is bitcoin only having 21M a good thing?

All it seems to do is make the hoarding issue seem more likely, make it seem like costs of goods would follow historical models and increase as each merchant/producer tried to get more and more of a share of a limited money supply out of a fear of not having liquid capital.

[DannyHamilton]

. . . Deflationary or static currency is actually a bad thing, economics 101 teaches that . . .

You are really late to this conversation.  Take some time to read what has been said over and over and over before you start asking questions that have already been answered many times.

https://bitcointalk.org/index.php?topic=11627.0

[Monster-Ant]

So if I come in late to the conversation, I can't ask questions about the conversation?

I'm seriously curious. Bitcoin caught my attention, I like some of the ideas, but have questions about certain details.

Mainly because the company I work for upgraded all their PoS eMachines as well as the old artist work stations and I managed to pick them up because lo and behold they all have Radeon 5XXX series cards in there.

Since I have a shop I just finished rebuilding I'm wondering if I should set up a nice mining group till the cards die, or just part it all out for cheap. (They're old card, been used in work stations and for graphics compiling/CAD/rendering and have a lot of time on their GPU's and VRAM)

But, if it's too complicated to answer, that's cool.

[smickles]

So if I come in late to the conversation, I can't ask questions about the conversation?

I'm seriously curious. Bitcoin caught my attention, I like some of the ideas, but have questions about certain details.

Mainly because the company I work for upgraded all their PoS eMachines as well as the old artist work stations and I managed to pick them up because lo and behold they all have Radeon 5XXX series cards in there.

Since I have a shop I just finished rebuilding I'm wondering if I should set up a nice mining group till the cards die, or just part it all out for cheap. (They're old card, been used in work stations and for graphics compiling/CAD/rendering and have a lot of time on their GPU's and VRAM)

But, if it's too complicated to answer, that's cool.

that link answers your question

[DannyHamilton]

So if I come in late to the conversation, I can't ask questions about the conversation? . . . But, if it's too complicated to answer, that's cool.

If you aren't going to take the time to read and understand the conversation at the link I provided, then you aren't going to take the time to read and understand anything anyone says in response to your questions.  No sense in wasting any more time here.

[Monster-Ant]

that link answers your question

A 28 page, with links to economic studies I already have read about/studied/been tested on in economic classes, that already have basic fallacies right in the arguments.

So basically the reason why having only 21M bitcoins is good is in hopes that it is a deflationary currency. Except...

• 21M coins doesn't even cover the number of transactions done each day, much less the dollar amount of the transactions.
• 21M coins does even leave enough coins to cover the number of people who hold one or more bank accounts in the United States of America alone.
• 21M coins does NOT prevent inflation. Inflation does not happen just due to more money being printed (although that can be a contributing factor in the case of overprinting) but is a complex equation taking into account the amount of money on the market, the market value of each monetary unit, spending power of the monetary unit, and consumer/producer confidence in the monetary unit.
• The fixed number of coins, as well as the number of coins lost, deleted, vanished over time shows that a significant percentage of the 21M is gone forever with no way to put them back on the market.
• There appears no way to increase the amount of coins available for mining or replicate existing coins in order to offset losses due to entropic/market/criminal factors.
• The idea that money increases in value just by holding onto it increases the amount of hoarding and actually harms an economy as investment firms become merely storage (As seen at one point with the Frugger Banking System)

But all of that is beside the point.

What I want to know is:

WHY only 21M bitcoins? That doesn't even allow for 1 bitcoin per person. Sure, you can slice it up into smaller percentages, but if each bitcoin is worth, say, $10USD, the handling fee from the miners/hashers is $2USD, that means each bitcoin is only worth $8USD, and if I choose to purchase a single apple at $0.15, the amount of bitcoin traded in that transaction not only is ludicriously small, but now I have to pay $2.15 for that apple.

So WHY only 21MBTC? Why not an amount that makes it a viable currency rather than just an interesting economics experiment?

[Monster-Ant]

So if I come in late to the conversation, I can't ask questions about the conversation? . . . But, if it's too complicated to answer, that's cool.

If you aren't going to take the time to read and understand the conversation at the link I provided, then you aren't going to take the time to read and understand anything anyone says in response to your questions.  No sense in wasting any more time here.

Your right. Your link, introducing several different well known economic theories with wikipedia links, was something I was not bothering to read. I hadn't gotten several pages in, cross referenced the links, read the wikipedia articles that I was unfamiliar with or that covered unfamaliar information, nor was I trying to decide what deflation had to do with a limited number of bitcoins.

Since you aren't wasting anymore time here, I won't bother explaining why the answer "DEFLATIONARY/STABLE CURRENCY!!!RAWR!" didn't answer one simple question I had...

WHY ONLY 21 MILLION COINS??

Or does your link on bitcoins and deflation cover that somewhere in the 26 pages?