We must not forget about Bitcoins staying power, The true value of bitcoin is in the Encryption, it is unbreakable by modern computers; The SHA256-512 encryption would require a computer with the mass of the solar system to crack by brute force... now that is security. Not only is it protected by the latest encryption it is done twice, then it is distributed so you will have to crack everyone else's as-well and after that you have to keep up with the network.
Only quantum computers will be able to crack it and those are a few decades away.
Bitcoin was created for one amazing thing, to be able to transfer information from point A to point B securely and unstoppably... once the transaction is made it cannot be reversed, it merely uses the word
currency throughout the paper.
The original white paper was called, Bitcoin: A Peer-to-Peer Electronic Cash System, If you read the paper you will notice that the Bitcoin part... was an afterthought; What is described in the paper is a system to transfer
any and I mean
ANY currency securely without compromising the banking system within the digital domain.
the price of Bitcoin does not matter when all I want to do is send some money to my mom, or buy that new Nvidia Tesla processor for doing some simulations, many people have forgotten this, people have built a trading system around it because it has been decoupled from the banking system it was intended for, with no support they have created and built upon Bitcoins Cryptographic engine; how else are they to convert their real money into something that can be securely transferred over the digital frontier? no one else is giving them that opportunity so the Bitcoin community is building their own infrastructure and learning as best they can along the way... this will come back and bite the regular financial system in the ass.(more innovation in the Bitcoin community, better products, better selection)
Fact: The Bitcoin community has evolved Bitcoin to be functional, something that it really was not in the beginning, it needed the banking component to transfer financial Value.
Fact: People are treating this as if it was meant to be a commodity, of course they have, the media has propagated this myth creating uncertainty in what could possibly be the most secure system ever created.
Now that we have reached this point in Bitcoins development, now we must study why the price is fluctuating.
who are the producers of the bitcoins? The Bitcoin miners who maintain the integrity and security of the Bitcoin network. Do they have a right to set their prices for bitcoin?... you must remember that they have expended resources to earn their bitcoins, they do have that right. The market does have it's effects, but i'm pretty sure that an old Gold miner would not accept less value than they put in to find that Gold, they will trade at fair market value and not one satoshi below what it cost them to produce it.
The Bitcoin miners creating the liquidity within the market set the bottom price, They control a certain percentage of the exchange rateNow who has the rest of the control over Bitcoins price? The holders of regular national currencies; who because of the media hype do not understand the practicality and purpose behind this technology. they just buy,sell,low,high like idiots with absolutely no understanding of the market... these are newb traders! and they're coming in by the boatload! There is more of them coming in than educated Bitcoin community members, this is a problem.
the other? The people holding on to their bitcoins ready to dump them onto the market; This is a good thing, it creates liquidity... but it also crashes the price of bitcoins when people don't want to sit on their bitcoins waiting for a dangerously insecure exchange to have the buyers become available to buy those bitcoins. I believe this is a good thing because... those hoarders are dumping their stashes into the general market
dwindling the amount of instability, allowing the system to reach an equilibrium between the early adopters and new adopters.
Another aspect of the price is due to Bitcoins customers(the people buying into bitcoin to have their transactions carried out... or the idiots who are planning a pump-n-dump). now these customers are new they know very little of what they have to do, they don't know they can trade in smaller denominations, hence limiting the number of buyers on the market. They need to be educated on how to buy only the amount of bitcoins that they need to carry out a secure transaction from point A to point B, they need to be educated.
The exchanges are Bitcoins weak spot, They can be attacked to bring the system down... The banking component that Bitcoin was supposed to be mated to had to be built and the best practices of the financial sector are right now being learned by the exchange operators. this again causes instability, how this gets resolved it will be up to the ingenuity of the Bitcoin community to resolve.
Once an equilibrium is reached, the system will be fine, it will begin to operate as it was intended, but a good chunk of the ecosystem that Bitcoin was supposed to be working with is non-existent and only being built now.
