Bitcoin Value - its all about the vendors

[falcoiii]

Currently, my perception of Bitcoin ownership is it is filled with people who fit into one or more categories.

1. Alternate Currency. Want an alternative currency (don't like banks or don't trust current fiat currency).
2. Speculate. Believe that bitcoin is going to go up in value in the future relative to fiat currency and want to make a profit in the fiat currency.
3. Regular Economy. People who want to buy and/or sell regular items goods and/or services in bitcoins because it is more efficient, convenient, etc...

These are the outcomes of bitcoin with only these people's motivations:

1. Alternate Currency.  Without any speculators or Regular Economy folk, it is going to wind up a "monopoly money".
2. Speculate.  Without people to transact "real" economic activity (exchange bitcoins for something other than another currency) it will be a cycle of bubble & crashes.
3. Regular Economy.  I suspect most people "in the world" fall into this category.

Using the price of bitcoins compared to fiat currency, it is clear there is a demand for bitcoins.  However, the question is what are you going to do with bitcoins once you have them?  The current answer is either hold them for a while and sell them at a profit or hold them for a long while and hope for an even bigger profit.

However, there is not a good way to get bitcoins out of the hands of the original purchasers/miners except to trade back to a fiat currency.

I have perused the bitcoin related offerings on several sites and IRC and find it "thin" at best.  There is nothing local to me (town of 200,000, 1 hour drive to a city of 1,000,000+).  There are only people willing to buy or sell bitcoins for cash.

These are some of the purchases we all make that could be converted to bitcoins:
Pay for housing (rent / mortgage)
Pay for transportation (bus fare, gas, car repairs)
Pay for food (grocery store, restaurant)
Pay for reglare goods (books, lights, beds)
Pay for standard services (plumbing, shipping, ISP)
Pay for gifts (toys, flowers, rings)
Pay taxes (good luck!)

So my ask is that everyone encourage local businesses to accept bitcoins.  There are payment systems that can instantly convert that to fiat currency.  And, if enough local merchants start taking bitcoins, then the need to cash out is reduced.

When I can find a local plumber that takes BTC, I will know it has "arrived".

[benjamindees]

I would re-name "regular economy" to "payment service" to be more clear.  (If that is indeed what you meant)

Other than that, your post is spot-on.

[mestar]

There are two main forces determining bitcoin price.  Speculation and mining.  Everything else is peanuts.

Miners have to sell $300.000 worth of coins each day at the current price, so you need $300.000 of fresh money every day, otherwise the price goes down. 

That $300.000 ends up paying for electricity and mining hardware.  But mostly electricity.

 

[fcmatt]

Hoarding and speculation counts for most of the current price/value in my book.