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Author Topic: Factors Affecting the Value of Bitcoins  (Read 830 times)
MrClub
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March 20, 2013, 07:10:42 PM
 #1

Here's a short list I've been working on of reasons the value of bitcoins may increase or decrease in the near term:

Decrease:
 - Superior digital currency may arise and supplant bitcoin
 - New attack on the protocol - alternate blockchain, mining shortcut/monopoly, etc.
 - More large-scale security breaches at online wallet sites (Blockchain.info, Coinbase) or exchanges (Mt. Gox)
 - Governments may act to restrict bitcoin (by making acceptance of BTC by companies illegal, for instance, or adding trade reporting requirements)

Increase:
 - Increasing acceptance in the economy
 - Speculation

A likely scenario in my mind is the value of bitcoins tracking upward ahead of the "acceptance curve" due to speculation, with occasional downward spikes due to the negative factors above.

What factors do you see affecting the value of bitcoins?
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Manticore
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March 20, 2013, 08:21:52 PM
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The core of what gives BTC value is the network effect and popularity. The technological model can be replicated. There are other virtual currencies whose benefits are identical. But the network effect is ultimately what makes BTC the Coca-Cola of virtual currencies. Just like anything else, if everyone believes there is worth -- there is worth. In that sense, BTC is similar to a piece of fine art. It can be perfectly replicated, but only everyones belief in the real thing gives the real thing a much higher value. I guess LTC is the Pepsi to BTC's Coca-Cola......what is Fanta? PPCoin? At any rate, I believe there is value in LTC as progenitor.

The idea of BTC as an alternative asset (speculation) and consumer adoption are the main threads that will bring success to BTC by way of network effect.

I completely agree with your scenario. Hype Cycles are natural to any new technology and will be caused by speculation centered on how fast consumer adoption takes place. Consumer adoption will not happen as quickly as everyone hopes, leading to a correction - and the cycle repeats. The underlying brilliance of BTC, however, and the position it enjoys will leave it higher after the next correction than the last one. BTC still has quite a ways to go before a sell-off IMO; too many new potential buyers just now learning about BTC.
Mike Christ
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March 20, 2013, 08:25:02 PM
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My Bitcoins are worth millions.

You just won't realize it for another decade or two Tongue

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