hoarding is not so easy

[grondilu]

People whining about hoarding don't realize that hoarding is not so easy.

As the price of bitcoin raises, it's becoming more and more difficult to resist the temptation of selling.

I can tell you that the day I can sell my bitcoins to buy a nice house near the beach, I will probably do it.   I can feel it right now, as my current bitcoin holdings begin to get a substantial value, at least theoretically.

That's why hoarding is not a threat:  at some point anyone will start to sell, and the less greedy will sell first, thus reducing the price and "punishing" the more greedy.

IMHO

[Alex Beckenham]

I get the opposite feeling, that selling is not so easy, making hoarding somewhat unavoidable in a way.

I don't mean 100 or even 1000 coins, I mean if you could buy a big house or a plane with your 370,000 BTC, I can't imagine that being a simple thing to move.

[BubbleBoy]

@grondilu: You are ignoring the tipping point where you see others sell, and your theoretical beach house vanish, and start selling also.
Hoarding is not bad because it's a risk that everybody gets rich (thermodynamics says nothing can do that). Hoarding is bad because it induces volatility and speculative mania.

[grue]

I get the opposite feeling, that selling is not so easy, making hoarding somewhat unavoidable in a way.

I don't mean 100 or even 1000 coins, I mean if you could buy a big house or a plane with your 370,000 BTC, I can't imagine that being a simple thing to move.

darkpool

[Alex Beckenham]

I get the opposite feeling, that selling is not so easy, making hoarding somewhat unavoidable in a way.

I don't mean 100 or even 1000 coins, I mean if you could buy a big house or a plane with your 370,000 BTC, I can't imagine that being a simple thing to move.

darkpool

Obviously the stats there are hidden so it's hard to guess how long that would take... are there darkpool traders standing by waiting to buy up $8m worth of coins?

[TwinWinNerD]

yes, because its splitted up in small fractions, and i think in 1 month or so the transaction volume will be so high that you can trade 350k coins without busting a bubble^^

[jmann]

Hoarding, while unlikely due to the reasons given, can occur - look at the bank runs and liquidity crisis of the Great Depression while the U.S. was on a gold standard.  This is a problem with any sort of fixed supply currency, i.e. gold and possibly bitcoin.

Pre- civil war, U.S. banks were (somewhat) free to issue their own private bank notes e.g. dollar bills (I say "somewhat" because there were still government restrictions requiring banks hold a certain types of bonds - usually government bonds of course - as collateral).  The banks backed these notes with gold, but it was still fractional reserve banking in that the banks didn't keep enough gold on hand to redeem all of their outstanding notes at once.  When there were bank runs, banks could print more of their private bank notes to meet the demand for currency, just as a bakery would make more bread if the price of bread went up due to increased demand.  Demanding gold was often impractical given the difficulty of using it for daily purposes.

Scottish free banks, interestingly, included a redemption clause on their bank notes allowing the banks to refuse to exchange the notes for a certain period of time.  However, if they did refuse, they had to pay a penalty to the bearer.  This helped to prevent bank runs for two reasons.  First, people knew if there was an attempted run on their bank, the bank would refuse gold redemption, hence making it useless to run on the bank in the first place.  Second, if there was a run, banks would block redemption thereby giving them enough time to liquidate assets.

Overall, the flexibility under free banking to issue private bank notes (and destroy them) kept the money supply flexible and therefore helped to prevent erratic changes in prices.  Money is a good just as bread, cars, or oil.   If you fixed the supply of these goods, prices would likely become more volatile (the history of OPEC provides some evidence of this).  

I think it would be interesting to explore the idea of bitcoin banks that use bitcoins as "gold", and then issue "bitnotes" that are backed by bitcoins on a fractional reserve basis.  Of course, people would still be free to keep their bitcoins in their digital pocket, or even use fully-reserved banks.

[torbank]

Greed is never easy.

[MyFarm]

I get the opposite feeling, that selling is not so easy, making hoarding somewhat unavoidable in a way.

I'm in the same boat as you. 

[hugolp]

Hoarding, while unlikely due to the reasons given, can occur - look at the bank runs and liquidity crisis of the Great Depression while the U.S. was on a gold standard.  This is a problem with any sort of fixed supply currency, i.e. gold and possibly bitcoin.

Pre- civil war, U.S. banks were (somewhat) free to issue their own private bank notes e.g. dollar bills (I say "somewhat" because there were still government restrictions requiring banks hold a certain types of bonds - usually government bonds of course - as collateral).  The banks backed these notes with gold, but it was still fractional reserve banking in that the banks didn't keep enough gold on hand to redeem all of their outstanding notes at once.  When there were bank runs, banks could print more of their private bank notes to meet the demand for currency, just as a bakery would make more bread if the price of bread went up due to increased demand.  Demanding gold was often impractical given the difficulty of using it for daily purposes.

Scottish free banks, interestingly, included a redemption clause on their bank notes allowing the banks to refuse to exchange the notes for a certain period of time.  However, if they did refuse, they had to pay a penalty to the bearer.  This helped to prevent bank runs for two reasons.  First, people knew if there was an attempted run on their bank, the bank would refuse gold redemption, hence making it useless to run on the bank in the first place.  Second, if there was a run, banks would block redemption thereby giving them enough time to liquidate assets.

Overall, the flexibility under free banking to issue private bank notes (and destroy them) kept the money supply flexible and therefore helped to prevent erratic changes in prices.  Money is a good just as bread, cars, or oil.   If you fixed the supply of these goods, prices would likely become more volatile (the history of OPEC provides some evidence of this).  

I think it would be interesting to explore the idea of bitcoin banks that use bitcoins as "gold", and then issue "bitnotes" that are backed by bitcoins on a fractional reserve basis.  Of course, people would still be free to keep their bitcoins in their digital pocket, or even use fully-reserved banks.

Yep. I have been thinking about how to mix the ideas of free banking with bitcoins. One way could be through gold and silver merchants acting as liquidity stabilizers, but still it does not have the flexibility of fractional reserve banking. I am curious about how the bitcoin banking system will develop.

Btw, at the begginning of the Great Depression the Federal Reserve tighten the money supply so it can not all be attributed to people panicking and demanding cash. It is true that after a short initial period of tightening the Federal Reserve started loosing up like crazy. But the problem is that during the crash of a bubble people will panick and save more cash. Its an unavoidable consequence of the boom and bust produced by central banks. Even when central banks try to avoid this effect they can not, because when the bubble crashes the banking system becomes broke and freezes the credit channels, making the efforts of central banking almost useless (as we are seeing during this crisis). This is why keynesians always demand government spending through monetized debt, because its the only way to save the banks by avoiding any kind of deflation. The problem is that these mesures produce distortions on the capital structure prolonging the crisis, perpetuate the central banking system, concentrate the banking system in a few hands and make the middle class and the poor even poorer. Its an unavoidable cycle if you have a central bank.

PS: Count me in the camp of the one that spends when bitcoin goes up in price. To the ones that keep saving their bitcoins when price goes up: you should think that after the price goes up, it usually corrects down. At some point bitcoin is going to suffer a major downward correction, so you should think about starting to spend your bitcoins.

[Vladimir]

classic.... fear and greed in action

[Oldminer]

To the ones that keep saving their bitcoins when price goes up: you should think that after the price goes up, it usually corrects down.

Tell that to those people here who bought bitcoins when they were worth 10c and sold them when they were worth $1. I doubt they would agree with you now.

[hugolp]

To the ones that keep saving their bitcoins when price goes up: you should think that after the price goes up, it usually corrects down.

Tell that to those people here who bought bitcoins when they were worth 10c and sold them when they were worth $1. I doubt they would agree with you now.

I have been around bitcoins when you could not exchange them for dollars or euros. Its normal for a young currency to have this kind of behaviour but it will stop at some point. I think and hope a big correction happens soon. Im very curious about the reaction of the Bitcoin community and hopefully a lot of the people that has come for the pure speculation will stay and decide to start trading in bitcoins. The real test for Bitcoin as currency is coming.

[billyjoeallen]

Boo Hoo. You thought all you had to do was buy a bitcoin lottery ticket and claim the prize?  It's not as if we have to wash dishes or dig ditches to get our profits. All we have to do is keep our heads when the herd stampedes. There is safety in numbers, but there is very little opportunity.

Do you have the courage to chart your own course and the brains to know where it takes you? Nobody said being a pioneer was easy. 

[jmann]

Its normal for a young currency to have this kind of behaviour

Could you give an example?  I don't believe this is true.  Most currencies (gold, silver, etc.) naturally arose due to market forces, and new currencies (U.S. dollars) were based on these existing currencies and were forced into use by law.  Bitcoin is a rather unique case.

[gigitrix]

Its normal for a young currency to have this kind of behaviour

Could you give an example?  I don't believe this is true.  Most currencies (gold, silver, etc.) naturally arose due to market forces, and new currencies (U.S. dollars) were based on these existing currencies and were forced into use by law.  Bitcoin is a rather unique case.

The deflationary nature, as well as the static rate of supply, make it a very different animal in my book. I could be wrong, time will tell.

[hugolp]

Its normal for a young currency to have this kind of behaviour

Could you give an example?  I don't believe this is true.  Most currencies (gold, silver, etc.) naturally arose due to market forces, and new currencies (U.S. dollars) were based on these existing currencies and were forced into use by law.  Bitcoin is a rather unique case.

How do you know that gold and silver did not behave this way in some culture when they started to be used as money?

You are correct that the Federal Reserve notes are completely different, precisely because they did not rise from the market.

[Ivanish]

The more you spend BTC now in ways that spread the adoption of BTC globally, the more the leftover BTC that you sit aside will be worth.

Would you rather have 1 BTC exchangeable to 20-30USD, or .5 BTC exchangeable to 50-75USD?

In other words, the sooner 1 BTC is exchangeable for 100 or 1000 USD (due to supply/demand/higher adoption), the sooner you can buy that house for .5 BTC.