I want you to have a look at this graph

[kiwiasian]

And tell me with a serious face that the Bitcoin economy is not going to crash.

[1715408938]

1715408938

[Bazil]

could have a correction, there was one in early May.  If so it will be a time to put more into bitcoins I think.  Also run the same time range over almost any equal period after april and you will see that the graph looks the same.  So basically this has been pretty steady since then.  The market will crash if an when all the speculators have had their fill and only if people don't actually start using the currency.  At that point the miners will be over producing.

[The Koolio]

And tell me with a serious face that the Bitcoin economy is not going to crash.

You think thats bad? try looking at oil or gold or any commodity over a time frame and you'll see similar rises.

[kiwiasian]

Exactly, that's the point I'm trying to make. It's going to crash.

[The Koolio]

but you havnt made a point, other commodities havnt crashed? yes it might lower and level out, but i doubt itll ever see single dollar figures again, if not for a while at least. just because theres a sharp increase doesnt mean a sharp decrease. Remember the relative number of users isnt that high compared to global population, as it picks up more and more you'll see that the price will just keep going up, yes some big players will sell off but i doubt itll crash

[piuk]

Oil has never crashed before?

[kiwiasian]

but you havnt made a point, other commodities havnt crashed? yes it might lower and level out, but i doubt itll ever see single dollar figures again, if not for a while at least. just because theres a sharp increase doesnt mean a sharp decrease. Remember the relative number of users isnt that high compared to global population, as it picks up more and more you'll see that the price will just keep going up, yes some big players will sell off but i doubt itll crash

Are you agreeing with me or disagreeing? That's exactly what I'm saying. Other commodities have crashed in similar patterns.

[Mashuri]

And tell me with a serious face that the Bitcoin economy is not going to crash.

Look at the same thing on a logarithmic scale.

[MarketNeutral]

Looks dangerous to me.



However.....

Perhaps a log chart would be better.

Also, consider similarly steep rises earlier in the year. Go back in time and zoom in and one sees something similar to what is happening now. (Think fractaly.)

Yet the price continued upwards after a correction.

Corrections are healthy.

The bitcoin market is a nascent market with relatively low volume and liquidity, and more importantly, it has yet to find any equilibrium, thus technical analysis is pretty much just guesswork.

Price discovery is still in its early stages.

One could just as easily argue that of course it's spiking upwards, because it started at zero. There was no IPO starting price, like with stocks.

A very ominous chart, indeed, but who doesn't recognize the speculative nature of such a young market?

[Sukrim]

Oil has never crashed before?

There's a "little bit" missing on that graph... 2004-2011. Get the data and prepare to be scared/amazed!

Also on the BTC picture there are 2 weeks missing - it would extend now up to ~30 USD.

[kiwiasian]

Oil has never crashed before?

There's a "little bit" missing on that graph... 2004-2011. Get the data and prepare to be scared/amazed!

Also on the BTC picture there are 2 weeks missing - it would extend now up to ~30 USD.

That would just make it look even more dangerous.

[billyjoeallen]

The bitcoin economy is not going to crash.  Bitcoin has no natural predators. It will out-breed any native currency. What is going to crash is the global economy. The fractional reserve system will either unwind, causing a deflationary death-spiral or eventually hyper-inflate. What will replace the Dollar as the world reserve currency? IMF special drawing rights? please. the Euro? two years from now there won't even be a Euro. Chuinese Yuan (renmimbi)? China is headed for a lost decade or two because they are following the same disasterous neo-mercantilist policies as Japan did. i remember the fear and panic in the 1980-s when we were afraid Japan would take over the world economically. They didn't and China won't and for the same reason.  What's left? gold and Bitcoin, mostly.

[DrSammyD]

Oil has never crashed before?

https://i.imgur.com/LkhHB.gif

There's a "little bit" missing on that graph... 2004-2011. Get the data and prepare to be scared/amazed!

Also on the BTC picture there are 2 weeks missing - it would extend now up to ~30 USD.

LOL, as if that chart reflects volatility in oil as opposed to volatility in the dollar. LOOK at the dates. It was the end of the 1970's. They just completely ended the ties to gold in dollars.

[nixxle]

And tell me with a serious face that the Bitcoin economy is not going to crash.

https://i.imgur.com/HBpyb.jpg

Look at the same thing on a logarithmic scale.

Please explain that to this non-mathematician

[phatsphere]

The bitcoin economy is not going to crash.  Bitcoin has no natural predators. It will out-breed any native currency. [...]  What's left? gold and Bitcoin, mostly.

wow, i'm amazed by your stark assumptions. though i fear, sadly most people prefer a strong global governance telling them what to do over some geeky software where they loose their money when the next crash/virus eats all their files on their computer.

[BombaUcigasa]

Your chart is obviously wrong, use the correct version next time...

[BombaUcigasa]

You might also be interested in this:

[billyjoeallen]

The bitcoin economy is not going to crash.  Bitcoin has no natural predators. It will out-breed any native currency. [...]  What's left? gold and Bitcoin, mostly.

wow, i'm amazed by your stark assumptions. though i fear, sadly most people prefer a strong global governance telling them what to do over some geeky software where they loose their money when the next crash/virus eats all their files on their computer.

As opposed to gold, which was confiscated in the thirties or fiat currency, which has lost over 90% of it's value since 1973?
A virus? srsly? ever heard of a backup?

and most people don't have to accept bitcoin in order for it to become a viable currency. it fills a market niche. it is the only product in that niche.  

[swusc2]

Bitcoin is trading at 25.81 as the last trade right now. I seems like the value is going down to stabilize the crazy growth in the past week. We'll probably see a burst as people come home from work later in the day (US). It might just be prime buying time right now.

[phatsphere]

Please explain that to this non-mathematician

A logarithmic scale is used to show the magnitude of some values, not their absolute value. The "distance" (in that case measured into the y-axis direction) between 1, 10, 100, and 1000 is the same. In comparison, using the usual linear scale the distance between 100 to 200 and 200 to 300 would be the same.
The intent is to flatten out peaks. Also, all your senses as a human being measure the environment in logarithmic scales - hence it is more "natural".

[Jack of Diamonds]

$31 is overvalue at the current difficulty. I predicted last week that this Friday would end at $19-$22. However I don't see a $25 closing entirely impossible.

$30 will stabilize at around 800k to 1m difficulty.

[DrSammyD]

Bitcoin is trading at 25.81 as the last trade right now. I seems like the value is going down to stabilize the crazy growth in the past week. We'll probably see a burst as people come home from work later in the day (US). It might just be prime buying time right now.

My thought's exactly. When I saw the price go up last night, I was like, please come down, please come down, I want to buy more.

[billyjoeallen]

Bitcoin is trading at 25.81 as the last trade right now. I seems like the value is going down to stabilize the crazy growth in the past week. We'll probably see a burst as people come home from work later in the day (US). It might just be prime buying time right now.

My thought's exactly. When I saw the price go up last night, I was like, please come down, please come down, I want to buy more.

me too! I sent a wire transfer this afternoon. I'm praying it stays below thirty until I can buy.

[kiwiasian]

Your chart is obviously wrong, use the correct version next time...

Sigh, look at the x axis. My graph started on July 2010, yours started at the beginning of 2011.

[BombaUcigasa]

Sigh, look at the x axis. My graph started on July 2010, yours started at the beginning of 2011.

Herp derp, setting different graph parameteres on bitcoincharts...



My argument still stands.

[ahtremblay]

And tell me with a serious face that the Bitcoin economy is not going to crash.

Look at the same thing on a logarithmic scale.

Look at the same thing upside down.

[Jaime Frontero]

ah.

so the "hockey stick" graph - in re global warming - will also be crashing down, and the world will be just fine?

because you don't like such uninterrupted uptrends?

because it doesn't fit with your understanding of... what?

no.

[clickbangdone]

ah.

so the "hockey stick" graph - in re global warming - will also be crashing down, and the world will be just fine?

because you don't like such uninterrupted uptrends?

because it doesn't fit with your understanding of... what?

no.

Probably because that graph is also fueled by speculation

[Freakin]

$31 is overvalue at the current difficulty. I predicted last week that this Friday would end at $19-$22. However I don't see a $25 closing entirely impossible.

$30 will stabilize at around 800k to 1m difficulty.

yeah i was guessing a little higher, around 22-24, but that is discounting the fact that upcoming difficulty change is baked into current price. 

I think around 25-26 is about right currently, though that doesn't mean it won't shoot up another $4 overnight and look like a washboard by 3PM tomorrow

[Kn1ghT]

MA's show uptrend with baseline currently nearing $20, the MA's have not crossed yet to signal a correctional pullback

RSI shows overbought @ 88.75(currently). Above 70 is overbought, above 50 is uptrend.

MACD shows the push above the moving averages, as time moves on when higher prices are made, but lower high's on MACD post, that will signal a divergence and prices should signal a pullback to the MA's in the near future.

ADX shows uptrend, althou weaker.

based on indicators, currently @ $30 the pair might be hitting an overbought barrier, and may pull back to the ~$20 area where it will find support. If after it fails to break new highs. If this is the case, I would expect it to dance in this range for some time, but ultimately trend upwards.

[imperi]

I think you guys might be underestimating the demand for Bitcoins. It doesn't necessarily have to match difficulty if the demand is great enough. Then again, you could be right.

[piuk]

50*6*24 = 7,200 coins mined per day

7200 * 365 = 2,628,000 more coins in circulation by the end of the year, 40% more coins in circulation by the end of the year.

That means all holders today will have a 40% less stake in bitcoins by the end of the year. So $216,000 of new demand per day is needed per day to keep the current market price. When the hype passes and bitcoins can no longer promise 100% returns in a few days it will be much more difficult to keep that demand up.

[Ummon]

$31 is overvalue at the current difficulty. I predicted last week that this Friday would end at $19-$22. However I don't see a $25 closing entirely impossible.

$30 will stabilize at around 800k to 1m difficulty.

There is no correlation between difficulty and bitcoin value against USD, this ratio depends only from the supply and the demand over the different markets. The difficulty is only a way to regulate the newly created bitcoins.

[mimarob]

I did an estimate of the total hardware investments made in mining. My card does 300 MHash/s. With it I can mine about 0.50 BTC a day. The average total is 50 BTC every 10 minutes. This means that there is a total mining capacity corresponding to 100*6*24 = 14400 cards of this type or abt. 22 million dollars. Double that for costs ...for cheaper pc hardware => $44 million. The speculative value of bitcoins now is 129000*50*27.5 = 177 MUSD. Electricity costs are harder to calculate but are the smaller part of the cost right now. So the bitcoins are right now valued to abt three-four times the cost invested.

[speeder]

I did an estimate of the total hardware investments made in mining. My card does 300 MHash/s. With it I can mine about 0.50 BTC a day. The average total is 50 BTC every 10 minutes. This means that there is a total mining capacity corresponding to 100*6*24 = 14400 cards of this type or abt. 22 million dollars. Double that for costs ...for cheaper pc hardware => $44 million. The speculative value of bitcoins now is 129000*50*27.5 = 177 MUSD. Electricity costs are harder to calculate but are the smaller part of the cost right now. So the bitcoins are right now valued to abt three-four times the cost invested.

You are assuming the wealth of the economy comes only from mining.

Several people are already selling not only goods, but services with bitcoin, this injects wealth into it.

For example, I already bought ads, silver bars, online cassino chips, company shares, some misc services... all of that with bitcoins, and I also sell services for bitcoins.

The service I do, in exchange of bitcoin, exchange the value of my service into the economy, creation wealth.

[BombaUcigasa]

There is no correlation between difficulty and bitcoin value against USD, this ratio depends only from the supply and the demand over the different markets. The difficulty is only a way to regulate the newly created bitcoins.

Are you sure?! It seems to me that there is...

[speeder]

If you pay attention, the difficulty graph look like the price graph shifted...

Thus now it is sorta clear to me, that price drives difficulty (and not the other way around)

[sketchman]

Your chart is obviously wrong, use the correct version next time...

http://bitcoincharts.com/charts/chart.png?width=743&m=mtgoxUSD&k=&r=180&i=&c=0&s=&e=&Prev=&Next=&v=0&cv=0&ps=0&l=1&p=0&t=S&b=&a1=&m1=10&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&SubmitButton=Draw&

By scaling up the value between lines like that, you're posting a deliberately misleading graph.

[BombaUcigasa]

If you pay attention, the difficulty graph look like the price graph shifted...

Thus now it is sorta clear to me, that price drives difficulty (and not the other way around)

It's called lagged correlation. When one factor influences another by a specified timeframe (such as CO2 emissions and temperature increases in subsequent decades). The price and difficulty affect each-other in a loop. The price goes higher, more people mine, difficulty increases too much. Difficulty increases, people buy instead of mining, price goes higher.

[BombaUcigasa]

Your chart is obviously wrong, use the correct version next time...

By scaling up the value between lines like that, you're posting a deliberately misleading graph.

I'm sorry if it's misleading to you. It's called "logarithmic scale" and it applies to all economy processes. The trend you see here will continue, until some point, the linear graph is useless from the perspective of someone who wants to look into the future.

Did you study economics in your lifetime by any chance?

[kiwiasian]

Sigh, look at the x axis. My graph started on July 2010, yours started at the beginning of 2011.

Herp derp, setting different graph parameteres on bitcoincharts...



My argument still stands.

And not to mention that the scale of your graph is completely off.

The distance between $20 and $50 is the same as between $0.2 and $0.5.

Nice try.

[Timo Y]

Conventional wisdom does not apply here. Bitcoin is a class of its own. It is a commodity the world has never seen before. Exponential growth so far reflects exponential growth of users. Nothing unsustainable about that - the userbase, and price, will stabilise eventually.  Once every tech savvy person on the planet has found out about bitcoin and it CONTINUES to grow exponentially, then it will definitely crash. We havent reached that point yet.

[speeder]

Sigh, look at the x axis. My graph started on July 2010, yours started at the beginning of 2011.

Herp derp, setting different graph parameteres on bitcoincharts...



My argument still stands.

And not to mention that the scale of your graph is completely off.

The distance between $20 and $50 is the same as between $0.2 and $0.5.

Nice try.

You are showing yourself to be quite dumb, or ignorant.


This IS the point of log scale, and it apply to many things (not only economics).


For example, the pitch of the center key on a Piano is 440Hz. (also known a A4).   A3 (one octave below), is 220Hz, A5 (one octave above) is 880Hz.

thus, a graph of "A" notes in a piano would be: 55, 110, 220, 440, 880, etc...


The volume also works that way, when you say something is 100 db, and sound twice as louder as 50 db, actually 100 db is MUCH more than twice, because dbs are in log scale.

Population increase, also happen in log scale.
Popularity increase (the driving force behind bitcoin price increase) is also in log scale.

1 person, informs 2.
If those 2 persons, inform more 2 each, the result is 4 persons.
If those 4, inform 2 each, now we have 8.
Then 16
32
64
128...

[kiwiasian]

Sigh, look at the x axis. My graph started on July 2010, yours started at the beginning of 2011.

Herp derp, setting different graph parameteres on bitcoincharts...



My argument still stands.

And not to mention that the scale of your graph is completely off.

The distance between $20 and $50 is the same as between $0.2 and $0.5.

Nice try.

You are showing yourself to be quite dumb, or ignorant.


This IS the point of log scale, and it apply to many things (not only economics).


For example, the pitch of the center key on a Piano is 440Hz. (also known a A4).   A3 (one octave below), is 220Hz, A5 (one octave above) is 880Hz.

thus, a graph of "A" notes in a piano would be: 55, 110, 220, 440, 880, etc...


The volume also works that way, when you say something is 100 db, and sound twice as louder as 50 db, actually 100 db is MUCH more than twice, because dbs are in log scale.

Population increase, also happen in log scale.
Popularity increase (the driving force behind bitcoin price increase) is also in log scale.

1 person, informs 2.
If those 2 persons, inform more 2 each, the result is 4 persons.
If those 4, inform 2 each, now we have 8.
Then 16
32
64
128...

Ok, that's cool. By putting the data in a logarithmic scale you've intentionally creating misleading data like the other guy said. Use a linear scale, that's what it should look like. If you had a linear line over a logarithmic scale you'd be assuming exponential growth, which is extremely misleading.

[BombaUcigasa]

Ok, that's cool. By putting the data in a logarithmic scale you've intentionally creating misleading data like the other guy said. Use a linear scale, that's what it should look like. If you had a linear line over a logarithmic scale you'd be assuming exponential growth, which is extremely misleading.

No. It's the only way to show what happens when you say: I want o you to have a look at this graph and notice anything weird with it. Because if you look at the logarithmic graph, there is nothing wrong about it, and everyone here is telling you logarithmic graphs match better than linear graphics various economical processes.

However, you think that we're trying to mislead you, when we tell you that everything looks good so far that means both the linear and logarithmic graphs.

[speeder]

Look at the graph of Brazillian stock exchange.

It is logarithm.

So, the Brazillian stock exchange is "misleading" you too?


Even regular currencies use logarithm graph... Ever saw how much a 1910 USD is worth? And a 1950 one?

[gigitrix]

My god people!

You don't need to know economics (I don't) to know why this has to be a log graph!

OMG 1USD buys 80Yen! The Yen is so weak against the dollar!

Well... no. The numbers are just our arbitrary representation of "value". What really matters is if the Dollar is worth 50% more Yen than it was before.

Therefore it's the percentages.

So going 1, 10, 100 etc (a logarithmic scale) is exactly the data that matters, rather than some nominal number with nothing backing it for comparison.

[avoid3d]

You all got trolled

More humour: http://coinwatcheralerts.blogspot.com/

[onesalt]

My god people!

You don't need to know economics (I don't) to know why this has to be a log graph!

OMG 1USD buys 80Yen! The Yen is so weak against the dollar!

Well... no. The numbers are just our arbitrary representation of "value". What really matters is if the Dollar is worth 50% more Yen than it was before.

Therefore it's the percentages.

So going 1, 10, 100 etc (a logarithmic scale) is exactly the data that matters, rather than some nominal number with nothing backing it for comparison.

Using a log graph doesn't prove anything, it merely displays the data in a different way. Regardless of how the data is displayed the point is the same, the bitcoin rose in value by close to 3000% in an *extremely* short timescale, which is incredibly fucking bad in a currency.

[BombaUcigasa]

Using a log graph doesn't prove anything, it merely displays the data in a different way. Regardless of how the data is displayed the point is the same, the bitcoin rose in value by close to 3000% in an *extremely* short timescale, which is incredibly fucking bad in a currency.

If that's bad, then what is good?

[onesalt]

Using a log graph doesn't prove anything, it merely displays the data in a different way. Regardless of how the data is displayed the point is the same, the bitcoin rose in value by close to 3000% in an *extremely* short timescale, which is incredibly fucking bad in a currency.

If that's bad, then what is good?

When its stable and not going up and down like the weight of an obese diabetic with stomach ulcers, for christs sake. No new companies are going to adopt bitcoins as a payment type if the actual value of them is going to change hour to hour in such huge amounts. I could pay someone 2 btc for a game and by the time the transaction is verified I need to pay him an extra 0.25 because of the price shift and then when that gets verified turns out he owes me 0.5 btc again.

[neptop]

It will crash like everything crashes. It's a basic economic rule and then it will reach new peaks. Why? Because sometimes there are more buyers willing to pay more and sometimes there are fewer buyers who don't want to pay good prices. That's called a market!

[hello_good_sir]

Log scales are appropriate, however a base 10 log scale isn't appropriate unless there is some underlying reason.  For most processes the natural log is more appropriate.

[onesalt]

It will crash like everything crashes. It's a basic economic rule and then it will reach new peaks. Why? Because sometimes there are more buyers willing to pay more and sometimes there are fewer buyers who don't want to pay good prices. That's called a market!

If a currency is acting like a market it means it's not working properly. Spending money to buy something shouldn't effect the value of that currency.

[BombaUcigasa]

When its stable and not going up and down like the weight of an obese diabetic with stomach ulcers, for christs sake. No new companies are going to adopt bitcoins as a payment type if the actual value of them is going to change hour to hour in such huge amounts. I could pay someone 2 btc for a game and by the time the transaction is verified I need to pay him an extra 0.25 because of the price shift and then when that gets verified turns out he owes me 0.5 btc again.

You mean when it never moves up or down and stays at the same price. Did you read the bitcoin paper by any chance? Do you understand that the increasing difficulty and thus value of each block is required so the network cannot be subverted by increasing resources from an adversary but instead relies on natural growth of participants, computing power and networking? Do you understand that the price for bitcoins will go up, and do so naturally by design? And do you understand that difficulty increases by a geometric progression (+25..+40% per round) thus creating a cost that grows exponentially? Do you now understand why a linear trend on a logarithmic chart shows that the system is growing at the predicted rate?

Think about the future. In 10 years, miners will receive less bitcoins per block. They will spend 1000 times more power to find the next block. And even with advances in computing power, the cost of a bitcoin will surely be at least 100 more than it is now. Do you suppose a bitcoin that costs 200$ to make should be sold for 20$?

About your payment issue. It's a stupid example. When you buy (lock in an order) you have to pay exactly the quote, nothing less or more. It's illegal to request a different payment than the one from the invoice, just because your local currency went up or down. It can go up or down, you should add a buffer as a seller. Completely irrelevant to the topic.

[onesalt]

When its stable and not going up and down like the weight of an obese diabetic with stomach ulcers, for christs sake. No new companies are going to adopt bitcoins as a payment type if the actual value of them is going to change hour to hour in such huge amounts. I could pay someone 2 btc for a game and by the time the transaction is verified I need to pay him an extra 0.25 because of the price shift and then when that gets verified turns out he owes me 0.5 btc again.

You mean when it never moves up or down and stays at the same price. Did you read the bitcoin paper by any chance? Do you understand that the increasing difficulty and thus value of each block is required so the network cannot be subverted by increasing resources from an adversary but instead relies on natural growth of participants, computing power and networking? Do you understand that the price for bitcoins will go up, and do so naturally by design? And do you understand that difficulty increases by a geometric progression (+25..+40% per round) thus creating a cost that grows exponentially? Do you now understand why a linear trend on a logarithmic chart shows that the system is growing at the predicted rate?

Think about the future. In 10 years, miners will receive less bitcoins per block. They will spend 1000 times more power to find the next block. And even with advances in computing power, the cost of a bitcoin will surely be at least 100 more than it is now. Do you suppose a bitcoin that costs 200$ to make should be sold for 20$?

About your payment issue. It's a stupid example. When you buy (lock in an order) you have to pay exactly the quote, nothing less or more. It's illegal to request a different payment than the one from the invoice, just because your local currency went up or down. It can go up or down, you should add a buffer as a seller. Completely irrelevant to the topic.

It's illegal to do so, correct, but companies aren't going to use bitcoin if they can't reliably turn a profit using it because of the exchange issues.

as for the difficulty rise, do I therefore assume that the correct answer is that a bitcoin mined for 1 dollar should be sold for 200? All that does is screw over late adopters and puts all of the wealth into the early adopters hands, which is an incredibly selfish ideal to have.

[BombaUcigasa]

as for the difficulty rise, do I therefore assume that the correct answer is that a bitcoin mined for 1 dollar should be sold for 200? All that does is screw over late adopters and puts all of the wealth into the early adopters hands, which is an incredibly selfish ideal to have.

No, the correct answer is: bitcoin should be sold for whatever someone is willing to pay for it. But you know that miners are not willing to sell unless it's more than 1 dollar. If hoever, many people need more bitcoins than available, then yes, the correct answer is 200.

Why would you buy bitcoins for 200$ a piece?

Maybe because this is a limited edition fortified digital cryptographically secured and rare set of tokens that can be used to instantly transfer and reward value anywhere on earth in just 10 minutes without fees or personal taxing and tracking.

I suppose higher prices will always happen when people buy more bitcoins than are currently produced. We know the network is making 10212 coins a day now, and maybe people want to buy more than 10212.

For example mtgox has a day's volume of 685.665 BTC. So even though today we only made 10212 coins, we bought and sold more than 67 times that. Do you suppose that people would ask a bit more than manufacturing price for something that is being sold 67 times more than it is being produced?

[Mashuri]

It will crash like everything crashes. It's a basic economic rule and then it will reach new peaks. Why? Because sometimes there are more buyers willing to pay more and sometimes there are fewer buyers who don't want to pay good prices. That's called a market!

If a currency is acting like a market it means it's not working properly. Spending money to buy something shouldn't effect the value of that currency.

A currency is always acting like a market because it always exists in a market, be it gold, USD or bitcoin.  Bitcoin is new and will therefore experience a lot of volatility as the market comes to terms with it.  The first crucial stage really rests on the exchanges.  We need to get to a point that any currency can be converted to/from bitcoin instantly and easily anywhere at any time.  Only when it is able to so readily relate to already established currencies can it start to stabilize.

[Bazil]

as for the difficulty rise, do I therefore assume that the correct answer is that a bitcoin mined for 1 dollar should be sold for 200? All that does is screw over late adopters and puts all of the wealth into the early adopters hands, which is an incredibly selfish ideal to have.

No, the correct answer is: bitcoin should be sold for whatever someone is willing to pay for it. But you know that miners are not willing to sell unless it's more than 1 dollar. If hoever, many people need more bitcoins than available, then yes, the correct answer is 200.

Why would you buy bitcoins for 200$ a piece?

Maybe because this is a limited edition fortified digital cryptographically secured and rare set of tokens that can be used to instantly transfer and reward value anywhere on earth in just 10 minutes without fees or personal taxing and tracking.

I suppose higher prices will always happen when people buy more bitcoins than are currently produced. We know the network is making 10212 coins a day now, and maybe people want to buy more than 10212.

For example mtgox has a day's volume of 685.665 BTC. So even though today we only made 10212 coins, we bought and sold more than 67 times that. Do you suppose that people would ask a bit more than manufacturing price for something that is being sold 67 times more than it is being produced?

If the demand is anything like most currencies then the value will be very high.  Currently there is about 830 billion dollars in circulation in the US.  That's over $2500 per person  (we know the actual number is much higher thanks to fractional reserve banking) in the US with a population of about 310 million. Considering that, lets assume we max out the bitcoins at 21 million in circulation.  Lets also assume that the number of people on the internet doesn't grow beyond the current 2 billion users.  If bitcoin becomes ubiquitous for internet transactions, that's 0.0105 bitcoins per person.  As you can see bitcoins, even at their maximum will be extremely scarce compared to just about all other currencies.  If we divide the USD per person by the bitcoins per person we get the a low estimate of the potential worth of bitcoins.  That's about 250 grand per bit coin.  Odds are, because of loss of bitcoins, a growing internet population and because we have a lot more money in the US system than circulating currency the actual value will probably be much higher.  So unless bitcoin is killed or replaced, values north of $250,000 (2011 USD) should be expected.

[onesalt]

as for the difficulty rise, do I therefore assume that the correct answer is that a bitcoin mined for 1 dollar should be sold for 200? All that does is screw over late adopters and puts all of the wealth into the early adopters hands, which is an incredibly selfish ideal to have.

No, the correct answer is: bitcoin should be sold for whatever someone is willing to pay for it. But you know that miners are not willing to sell unless it's more than 1 dollar. If hoever, many people need more bitcoins than available, then yes, the correct answer is 200.

Why would you buy bitcoins for 200$ a piece?

Maybe because this is a limited edition fortified digital cryptographically secured and rare set of tokens that can be used to instantly transfer and reward value anywhere on earth in just 10 minutes without fees or personal taxing and tracking.

I suppose higher prices will always happen when people buy more bitcoins than are currently produced. We know the network is making 10212 coins a day now, and maybe people want to buy more than 10212.

For example mtgox has a day's volume of 685.665 BTC. So even though today we only made 10212 coins, we bought and sold more than 67 times that. Do you suppose that people would ask a bit more than manufacturing price for something that is being sold 67 times more than it is being produced?

Bitcoins aren't consumed, so saying that because 67 times more of them are moved around than were produced in a day is errornous. For all that is known, that could be one bitcoin moved from person to person 670,000 times.

We need to get to a point that any currency can be converted to/from bitcoin instantly and easily anywhere at any time.  Only when it is able to so readily relate to already established currencies can it start to stabilize.

And this is an impossible pipe dream due to the constraints on the way bitcoin works.

[Cluster2k]

Current bitcoin value is down almost 30% in two days, yet the next estimated difficulty level is still high at 781,000.  I put forward two ideas:

The difficulty level will continue to rise even if the price falls much further.  Those who have already invested in mining rigs are not about to switch them off.  They may even overclock more to try and recover their costs as soon as possible should BTC fall much further.  There is the cost of electricity in all this too, much it's still much lower than the price of a BTC.  But it will curtail further investment in mining rigs.  Who is going to spend $1k on a 3x 6970 rig when it can earn maybe 2 BTCs in a day (at future difficulty level)?

The other thing is we need is people to be pumping USD$ into the marketplace.  The value of BTCs cannot sustain itself based on existing BTC miners trading with each other, as the majority are no doubt interested in selling and making money rather than high ideals about a P2P currency.

[Rodyland]

The other thing is we need is people to be pumping USD$ into the marketplace.  The value of BTCs cannot sustain itself based on existing BTC miners trading with each other, as the majority are no doubt interested in selling and making money rather than high ideals about a P2P currency.

What we REALLY need is people to start using bitcoin AS A CURRENCY.  People need to start using it to buy stuff, sell stuff.  If bitcoin gains traction as a true medium of exchange, its value when compared to other currencies will stabilise (relatively).  You are correct that BTC cannot exist as medium mainly for miners and speculators to buy and sell off each other.

[neptop]

Want to see a similar chart?
http://www.wolframalpha.com/input/?i=price+of+gold

[BombaUcigasa]

Bitcoins aren't consumed, so saying that because 67 times more of them are moved around than were produced in a day is errornous.

They are not consumed, but the extra swapping needs overhead. This is in the form of financial liquidity, which attracts with it opportunity benefits proportional to price.

For all that is known, that could be one bitcoin moved from person to person 670,000 times.

What you don't know, is that my quoted volume was for USD/BTC trades for each day. Those trades carry a 0.6% tax. I suppose that person would pay 92500$ a day just so his one bitcoin is worth 20 times it's cost to make...