How to determine the price of something in Bitcoin?

[dancupid]

One of the arguments against bitcoin is that it is deflationary (ultimately) so people will spend their fiat before they spend their bitcoins. This argument seems reasonable if the bitcoin price is just directly converted from the current mt.gox $ price.

I've sold a few items on bitmit  - and looking back, I think I could have priced these (very few) items at about 50% of the price I bought them at wholesale and still made a profit (due to the current year long rally).

It seems to me that items priced in Bitcoin are too expensive - the inclination is to simply follow the dollar price and ignore the future potential of bitcoin.
How many merchants are at least passing on the credit card/paypal fee saving and seriously giving the customer the full advantage and potential of using bitcoin?

If bitcoin is to succeed, bitcoin prices have to reflect all the advantages of using bitcoin - there is no reason that bitcoin prices need to be fixed directly to the US dollar.
The bitcoin price needs to be attractive enough for the customer to prefer to use their bitcoins over using their dollars.

I realize that this is just market forces - but there seems to be very little sign of this amongst merchants (perhaps because they are converting their bitcoins to fiat immediately).

A merchant who really wants raw bitcoins has a big advantage over a merchant who wants fiat (directly or via immediate bitcoin $ conversion) and they should reflect that in their prices.

[Piper67]

One of the arguments against bitcoin is that it is deflationary (ultimately) so people will spend their fiat before they spend their bitcoins. This argument seems reasonable if the bitcoin price is just directly converted from the current mt.gox $ price.

I've sold a few items on bitmit  - and looking back, I think I could have priced these (very few) items at about 50% of the price I bought them at wholesale and still made a profit (due to the current year long rally).

It seems to me that items priced in Bitcoin are too expensive - the inclination is to simply follow the dollar price and ignore the future potential of bitcoin.
How many merchants are at least passing on the credit card/paypal fee saving and seriously giving the customer the full advantage and potential of using bitcoin?

If bitcoin is to succeed, bitcoin prices have to reflect all the advantages of using bitcoin - there is no reason that bitcoin prices need to be fixed directly to the US dollar.
The bitcoin price needs to be attractive enough for the customer to prefer to use their bitcoins over using their dollars.

I realize that this is just market forces - but there seems to be very little sign of this amongst merchants (perhaps because they are converting their bitcoins to fiat immediately).

A merchant who really wants raw bitcoins has a big advantage over a merchant who wants fiat (directly or via immediate bitcoin $ conversion) and they should reflect that in their prices.

If and when Bitcoin becomes widely adopted as a currency, its deflationary nature will be incorporated into the pricing structure, so people will be more willing to sell something for less BTC than the equivalent USD exchange rate *because*  it is deflationary and will tend to gain ground over time.

Right now, though, USD or other fiat exchange rate seems like a good baseline.

[oleganza]

One of the arguments against bitcoin is that it is deflationary (ultimately) so people will spend their fiat before they spend their bitcoins.

So the desire of people to keep bitcoins (and spend USD because it's less valuable) is a reason for their unwillingness to buy bitcoins. I see some logical contradiction here. Either people don't want bitcoins because they don't understand them, don't trust, cannot buy and spend them. Or they want to buy bitcoins for whatever reason - to invest or to spend elsewhere. But you cannot say that willingness to keep and not to sell BTC is an argument for not buying it.

[franky1]

One of the arguments against bitcoin is that it is deflationary (ultimately) so people will spend their fiat before they spend their bitcoins.

So the desire of people to keep bitcoins (and spend USD because it's less valuable) is a reason for their unwillingness to buy bitcoins. I see some logical contradiction here. Either people don't want bitcoins because they don't understand them, don't trust, cannot buy and spend them. Or they want to buy bitcoins for whatever reason - to invest or to spend elsewhere. But you cannot say that willingness to keep and not to sell BTC is an argument for not buying it.

lets just say all the traders on gox based their pricing thoughts on memory dealers, alpacasocks and SR for instance.

instead of those three selling an item worth $21 for 1BTC. you want them to sell it for 0.8BTC because the price in the future "should" "in theory" rise with time and the merchant would eventually break even by hoarding the coin.

my answer to that is: chicken or the egg
why: because although it may drive up speculation because now gox will say everyone is willing to spend more then $26 for a bitcoin (price of a whole BTC based on the $21 for 0.8BTC). they are only willing to do this because of speculation.
its fuelling itself with no bases in reality for the valued cause.
its better to stick to a proper value base, such as electricity costs+time+equipment costs+ small profit. and let the difficulty of the network drive the price for ACTUAL value/cost.

my second answer is: merchants need their fiat that week to buy more stock. so basing it on a projected value of 6 months time would lose him money when he cashes out at the end if the week.

the only way it would work is if middle men gave the merchant his £21 for his 0.8BTC that week and they hoard the coins for the speculated rise it causes

[CurbsideProphet]

If bitcoin is to succeed, bitcoin prices have to reflect all the advantages of using bitcoin - there is no reason that bitcoin prices need to be fixed directly to the US dollar.
The bitcoin price needs to be attractive enough for the customer to prefer to use their bitcoins over using their dollars.

Would you sell me a $50 Amazon gift card for 1 BTC?  If there's no reason to fix directly to the USD, lets make a deal.

I realize that this is just market forces - but there seems to be very little sign of this amongst merchants (perhaps because they are converting their bitcoins to fiat immediately).

For the most part you have to convert your bitcoin to fiat immediately.  As a business you still need to pay your suppliers, personnel expenses, utilities, etc.  Like it or not, this is overwhelmingly done in fiat.

A merchant who really wants raw bitcoins has a big advantage over a merchant who wants fiat (directly or via immediate bitcoin $ conversion) and they should reflect that in their prices.

Only if they have the luxury to hold the coin.  Most businesses need to use their cash flow to pay operating expenses, service their debt, etc. 

[bullioner]

I've sold a few items on bitmit  - and looking back, I think I could have priced these (very few) items at about 50% of the price I bought them at wholesale and still made a profit (due to the current year long rally).

"Looking back" being the key.  There are many commodities, shares, and so on, of which this could be said, but it only makes sense when doing a transaction to consider the current price.

Look at it this way.  You could have sold your items priced in Dollars, and then purchased Bitcoins straight away with your Dollars.  So it is also true that you could have priced them in Dollars at 50% of the price, and still made a profit, still due to the current year long Bitcoin rally.

In other words, you should consider these things separately: selling something for its current value, and investing value over time so that it grows.

[dancupid]

I've sold a few items on bitmit  - and looking back, I think I could have priced these (very few) items at about 50% of the price I bought them at wholesale and still made a profit (due to the current year long rally).

"Looking back" being the key.  There are many commodities, shares, and so on, of which this could be said, but it only makes sense when doing a transaction to consider the current price.

Look at it this way.  You could have sold your items priced in Dollars, and then purchased Bitcoins straight away with your Dollars.  So it is also true that you could have priced them in Dollars at 50% of the price, and still made a profit, still due to the current year long Bitcoin rally.

In other words, you should consider these things separately: selling something for its current value, and investing value over time so that it grows.

I purchase wholesale items for about 90c from China and then sell them for 4 or 5 dollars - ie the value of these items to me is 90c.
I want to make a profit, but I also want to attract bitcoin buyers, so I can offer bitcoin buyers a cheaper price. I have no credit card fees or paypal fees or chargebacks with bitcoins, so I can cut the price; and I also want bitcoins, so I can cut the price further.
The value of something someone sells in Bitcoins does not need to be the same as the dollar price unless they are doing a currency exchange (for amazon gift cards or whatever).
I can sell the same items for $3 in bitcoins and still make the same profit if I accept bitcoins directly.