Hyper Inflation, Round 2?

[HappyBitCoinUser]

So the first wave of hyper inflation may have been when Cyprus banks got looted and then everyone that wanted BitCoin had to wait 3 days for wire transfer to clear. Soon as that happened all the new people bought up BitCoins at current price and skyrocket the value.

Now we might get a second wave of hyper inflation? Imagine, seeing BitCoin rise from $40 to $147 over night (due to Cyprus). Now a 2nd group of people want in on the action. BitCoin value seems to have settled around the $131-$141 for last 2 days, and just today the value has skyrocketed up to $154 high value! I think we're going to see a 2nd wave of hyper inflation, and its happening RIGHT NOW!

I was waiting for prices to come back down in the low $140's so I could buy in a again to make a 1-2% profit, but might have to bite the bullet on the new $152-$154 current price, and ride the wave up to $200-$300 per coin.

What are you all doing? Waiting or jumping in on the bandwagon?

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[Photonfrog]

I would expect the growth trend to keep going for a while. This is by my guessing a strongly viral growth but with a long incubation period (almost 1 week from infected to contagious).

What it takes for the viral coefficient to drop below 1 is beyond predictable. We can guess it will require a significant volume of individuals starting to cash out at a loss. But when?

[M2NY]

Hi there,

isn't that what you would call a hyper-deflation? The value of BTC is increasing so all BTC prices are going down. Well might be just the opposite perspective but our fiat currencies are considered to be inflating, so BTC is clearly deflating from this point of view.

[Sander]

Hi there,

isn't that what you would call a hyper-deflation? The value of BTC is increasing so all BTC prices are going down. Well might be just the opposite perspective but our fiat currencies are considered to be inflating, so BTC is clearly deflating from this point of view.

What he said, it's price deflation when prices drop.
Due to BTC mining there is always a monetary inflation of BTC untill all the bitcoins have been mined. If the coin value was stable this would also lead to price inflation, but the value of the BTC is rising so much faster then new coins are being mined that the monetary inflation is overshadowed by the price hyperdeflation.

Atleast that's what I get from it, I'm no economist.

[ArmoredDragon]

Hi there,

isn't that what you would call a hyper-deflation? The value of BTC is increasing so all BTC prices are going down. Well might be just the opposite perspective but our fiat currencies are considered to be inflating, so BTC is clearly deflating from this point of view.

What he said, it's price deflation when prices drop.
Due to BTC mining there is always a monetary inflation of BTC untill all the bitcoins have been mined. If the coin value was stable this would also lead to price inflation, but the value of the BTC is rising so much faster then new coins are being mined that the monetary inflation is overshadowed by the price hyperdeflation.

Atleast that's what I get from it, I'm no economist.

I'm not an economist either, but I don't believe that BTC will see a steady rate of inflation like a traditional fiat currency. I think instead it will simply behave like gold did prior to the 70's where it retained a relatively stable value for over 300 years. The only times in history that the value of gold changed was following the discovery of the Americas (where it saw brief inflation) and then in the 70's when it became a commodity (for the first time ever, we were using gold to create stuff other than luxury items and coinage, such as computer chips.) Like other commodities, gold is now subject to periods of inflation and deflation. Right now gold is in a bubble in my opinion and is not worth diversifying into.

BTC will probably see wild variations in price until all blocks are mined AND anybody who is interested in BTC will already have a stake in it, even if a very small one. Keep in mind that not everybody will want or even be able to obtain a stake in BTC due to the barriers for doing so (e.g. needing a computer with access to the internet when exchanges are needed). At that point, BTC won't be a good idea for investment, rather it will simply become a medium of exchange. Good investments yield dividends or interest.

[Behemot]

I think the price will keep groing a bit every week, BTC is just having it's tim finally. But I'd guess there will be huge inital drop when the few batches of ASICs from both AVALON and BFL will hit the public after mid of this month. So I jumped to LTC just for now because I can't really predict where the price will fall with the ASICs.

But maybe it'll be some good opportunity to throw some $ in when BTC will go down and than sell for high again and make small fortune?

[DannyHamilton]

I think the price will keep groing a bit every week, BTC is just having it's tim finally. But I'd guess there will be huge inital drop when the few batches of ASICs from both AVALON and BFL will hit the public after mid of this month. So I jumped to LTC just for now because I can't really predict where the price will fall with the ASICs.

But maybe it'll be some good opportunity to throw some $ in when BTC will go down and than sell for high again and make small fortune?

Why would ASIC cause the price to fall?

[DannyHamilton]

- snip -
BTC will probably see wild variations in price until all blocks are mined
- snip -

136 years from now?  Really?  We have to wait that long before the exchange rate stabilizes?

[Mangalica]

Like some previous posters before me, I'd call this deflation instead. Prices (in BTC) have been dropping.

[smahopwi]

I don't know when it will come but the likely jump to at least $250 is coming soon(ish).

[phrozenspite]

I'm still having a hard time believing the massive price increase.  But I'm not complaining since i built a gaming PC and have long since been a console gamer(due to lack of quality PC only titles).  So this is allowing me some decent ROI

[DannyHamilton]

$1,000 by the end of 2013

$100,000 by the end of 2014

 

[Behemot]

I think the price will keep groing a bit every week, BTC is just having it's tim finally. But I'd guess there will be huge inital drop when the few batches of ASICs from both AVALON and BFL will hit the public after mid of this month. So I jumped to LTC just for now because I can't really predict where the price will fall with the ASICs.

But maybe it'll be some good opportunity to throw some $ in when BTC will go down and than sell for high again and make small fortune?

Why would ASIC cause the price to fall?

Much more money than usually will "appear". It is classical example of inflation, isn't it. Some people who will gain way too many bitcoins (because of they will initally mine way more) will sell. But as I said, if the demand will continue - and it will, european socialist thiefes are sending the whole Europe to shit (not that situation in US is that much better) making more people go to more safe currencies - it will rise back eventually.

$1,000 by the end of 2013

$100,000 by the end of 2014

 

Why not? FED is printing the green papers like never did before. USD has lower value every day. Euro will come to shit soon as well, socialists are breaking the rules and ECB will start priting euros soon as well. They will probably rob ppl of their money as they did in Croatia first before they will start printing it heavily, but they will eventually, it's all just a matter of time.

[DannyHamilton]

- snip -
But I'd guess there will be huge inital drop when the few batches of ASICs from both AVALON and BFL will hit the public after mid of this month.
- snip -

Why would ASIC cause the price to fall?

Much more money than usually will "appear". It is classical example of inflation, isn't it. Some people who will gain way too many bitcoins (because of they will initally mine way more) will sell. But as I said, if the demand will continue - and it will, european socialist thiefes are sending the whole Europe to shit (not that situation in US is that much better) making more people go to more safe currencies - it will rise back eventually.
- snip -

That's not how Bitcoin works.  Increasing the hashing power on the network does not significantly increase the amount of bitcoins that "appear". It only affects who gets the bitcoins that were already going to "appear".  Every 2016 blocks the protocol automatically adjusts the target difficulty to attempt to keep the total number of blocks found by the entire network around 144 blocks per day.

Lets take a look at some numbers:

The next difficulty change is due to occur at block 231840
At that time there will be 11,046,000 bitcoins in existence

If no new hashing power comes online for 2 weeks after that, there should be 2016 blocks solved and a total of 50,400 bitcoins will "appear".
This is an increase of 0.4563%

If enough ASIC instantaneously come online to double the entire network hashing power the exact moment after the 231804'th block is solved, then the difficulty won't have adjusted enough and the next 2016 blocks will occur twice as fast as normal.  At the end of one week 2016 will have been solved, and the protocol would then double the difficulty.  Therefore during the remaining week 1008 blocks would be solved for a total of 3024 blocks and a total of 75,600 bitcoins will "appear".
This is an increase of 0.6844%

At that time, due to the increase in difficulty, the network would return to 2016 blocks per week.
In this highly unlikely scenario of a complete instantaneous doubling of the entire network hashing power in a precise single moment immediately after the next difficulty change, there is only an extra 25,200 bitcoins that have come early.  Only a 0.2271% increase over the expected supply of 11,096,400.

It is far more likely that ASIC will come online spread out over several weeks giving the protocol time to keep up with the increase in hashing power by continuously adjusting the difficulty target.  As a result the number of extra bitcoins is likely to be significantly less than 25,200 resulting in a significantly smaller than 0.2271% increase in supply.

Furthermore, the community knows that ASIC are coming online, and understands that this is likely to lead to a very slight short-term increase in supply. As such, any price that the market settles on likely already takes into consideration this likelihood, and the increase in supply shouldn't have a significant effect on the exchange rate.

[glt512]

i sure hope it keeps rising considering I have real money invested in this currency. Some people think it will keep rising, others think it will definitely crash soon.

[DannyHamilton]

i sure hope it keeps rising considering I have real money invested in this currency. Some people think it will keep rising, others think it will definitely crash soon.

Bitcoin is a highly speculative and extremely risky investment.  It is not wise to invest money that would be financially devastating to lose.

I wouldn't be surprised to see $10,000 per bitcoin within 5 years.

I also wouldn't be surprised to see $0.01 per bitcoin (or even 1,000 bitcoin per $0.01) within 5 years.

[tobobit]

i sure hope it keeps rising considering I have real money invested in this currency. Some people think it will keep rising, others think it will definitely crash soon.

Bitcoin is a highly speculative and extremely risky investment.  It is not wise to invest money that would be financially devastating to lose.

I wouldn't be surprised to see $10,000 per bitcoin within 5 years.

I also wouldn't be surprised to see $0.01 per bitcoin (or even 1,000 bitcoin per $0.01) within 5 years.

I would be surprised to see the latter.

[Sander]

I'm not an economist either, but I don't believe that BTC will see a steady rate of inflation like a traditional fiat currency. I think instead it will simply behave like gold did prior to the 70's where it retained a relatively stable value for over 300 years. The only times in history that the value of gold changed was following the discovery of the Americas (where it saw brief inflation) and then in the 70's when it became a commodity (for the first time ever, we were using gold to create stuff other than luxury items and coinage, such as computer chips.) Like other commodities, gold is now subject to periods of inflation and deflation. Right now gold is in a bubble in my opinion and is not worth diversifying into.

BTC will probably see wild variations in price until all blocks are mined AND anybody who is interested in BTC will already have a stake in it, even if a very small one. Keep in mind that not everybody will want or even be able to obtain a stake in BTC due to the barriers for doing so (e.g. needing a computer with access to the internet when exchanges are needed). At that point, BTC won't be a good idea for investment, rather it will simply become a medium of exchange. Good investments yield dividends or interest.

Yeah we agree, it won't have a steady rate of inflation like traditional currency. I was explaining what I understood of inflation/deflation. More bitcoins being created means monetary inflation, because that's the definition of monetary inflation afaik.

[DannyHamilton]

i sure hope it keeps rising considering I have real money invested in this currency. Some people think it will keep rising, others think it will definitely crash soon.

Bitcoin is a highly speculative and extremely risky investment.  It is not wise to invest money that would be financially devastating to lose.

I wouldn't be surprised to see $10,000 per bitcoin within 5 years.

I also wouldn't be surprised to see $0.01 per bitcoin (or even 1,000 bitcoin per $0.01) within 5 years.

I would be surprised to see the latter.

Then you don't understand how experimental, bleeding edge, and risky the future of bitcoin is.

[odolvlobo]

In case somebody hasn't realized it yet, the OP is using the term "hyper-inflation" incorrectly. "Inflation" is either rising prices of goods or an increasing money supply, depending on the context. "Hyper-inflation" is an extreme case of inflation, and generally occurs when people spend money as soon as they get it because its value is dropping so quickly.

The OP is referring to the dramatic rise in price of BTC, which is none of those.