BitPay is not Bitcoin....persistent foreign exchange risk costlier than CC.

[Manticore]

Gosh, is this so hard to understand?
Dollar doesn't fluctuate relatively to CPI?
OF COURSE, because CPI is calculated based on DOLLARS!
All volatility is the relative,if you measure in dollars, then bitcoin price will be fluctuating forever (as everything else).

The foreign exchange risk will be there until bitcoin succeed. (Then it is not a "foreign" thing anymore).

So to use this argument to say bitcoin is problem is redundant --This is what bitcoin need no "conquer"

And choose your side, stop blame bitcoin, since it has to be this way until it is not.

Consumer price index measures changes in the price level of a market basket of consumer goods and services purchased by households (inflation). The USD doesn't fluctuate much relative to the market basket of goods. The relative prices of goods fluctuates, which sometimes mimics inflation.

I'm simply pointing out a reason why people should not be cheering for Bitcoin to go to $1000 anytime soon, then bust, the go up again, etc etc.

It seems that anyone who doesn't cheer and pump Bitcoin to go straight to the moon is labeled a heretic. Everyone should be cheering for Bitcoin to remain fairly stable for awhile. This 'buy now while it's cheap because its going to $1000 in 3 months mentality' is nonsense. The more everyone speculates & hoards, the more damage will be done later. Strange that nobody realizes instability is an issue......it is a make or break issue.

So IMO that makes me more in favor of Bitcoin than most of the cheerleaders.

[Manticore]

It really depends on the cost of the credit card transaction. At one extreme one has a customer with good credit that has a 1% cash back credit card doing a card present transaction with a large merchant. In this scenario the merchant may be paying 1.6% or less fee and with the customer getting 1% back the effective cost is under 0.6%. There is simply no way BitPay with Bitcoin can compete here.

In the other extreme we have customer with poor credit using a prepaid debit card (cost to the customer can be easily be 5-10% by the time load fees are factored in) doing a small online transaction with a "high risk" merchant who may end up paying 10% or more by the time all the fees are factored in. The effective cost here can easily be over 20%. BitPay with Bitcoin wins hands down here.

When either the customer or the merchant are "high risk" the cost can easily exceed 10% and again BitPay with Bitcoin wins hands down.
Now for in person transactions the "high risk" problem is eliminated by using cash, but online Bitcoin becomes the only cost effective option.

I have said it before and will say it again the low hanging fruit for Bitcoin has a FICO score in the US under 600 and more in the 350 range and this is a large market in the US alone that is growing fast. Guess what happens to your FICO score after a mortgage foreclosure?

I wonder how tech savvy that demographic is, overall (those w/o bank accounts for Paypal but with prepaid debit cards).

One problem, the only traders allowed on Coinlab, Tradehill, etc, are accredited investors (net worth $1M or $200K per year). Perhaps this will change in the future to make it more easily accessible to different demographics. I really like where you're going with this.....interesting.

[ManBearPig]

A few points and some personal experience:

You're cherry-picking the price spread: BTC is currently volatile but isn't ALWAYS on the pullback from a massive gain.

I'm a UK Bitpay merchant and one of the reasons I accept Bitcoin is because I know that generally, the price is going up.

Having had my business hampered by distrusting, greedy and inept merchant account providers I can safely say it is MUCH less hassle to accept BTC than credit cards. Funds can be held in reserve for up to 6 MONTHS. This is cashflow suicide.

I also accept PayPal. They charge 3% AND I get screwed again when I accept a PayPal payment in USD.

[kjj]

Gosh, is this so hard to understand?
Dollar doesn't fluctuate relatively to CPI?
OF COURSE, because CPI is calculated based on DOLLARS!
All volatility is the relative,if you measure in dollars, then bitcoin price will be fluctuating forever (as everything else).

The foreign exchange risk will be there until bitcoin succeed. (Then it is not a "foreign" thing anymore).

So to use this argument to say bitcoin is problem is redundant --This is what bitcoin need no "conquer"

And choose your side, stop blame bitcoin, since it has to be this way until it is not.

Consumer price index measures changes in the price level of a market basket of consumer goods and services purchased by households (inflation). The USD doesn't fluctuate much relative to the market basket of goods. The relative prices of goods fluctuates, which sometimes mimics inflation.

I'm simply pointing out a reason why people should not be cheering for Bitcoin to go to $1000 anytime soon, then bust, the go up again, etc etc.

It seems that anyone who doesn't cheer and pump Bitcoin to go straight to the moon is labeled a heretic. Everyone should be cheering for Bitcoin to remain fairly stable for awhile. This 'buy now while it's cheap because its going to $1000 in 3 months mentality' is nonsense. The more everyone speculates & hoards, the more damage will be done later. Strange that nobody realizes instability is an issue......it is a make or break issue.

So IMO that makes me more in favor of Bitcoin than most of the cheerleaders.

The simple concept that seems to escape people is that when the exchange rate is higher, each dollar (or whatever) has a smaller effect on the market than the same dollar (or whatever) when the rate is lower.

At an exchange rate of $1000 to 1 BTC, bitcoin will be 100 times harder to push around than it was at $10.  Stability comes from size.  Size comes from adoption.

You can wish for stability without size, but your unicorn will show up sooner.  If you really want stability, you should be trying to find ways to increase adoption, which will lead to bigger swings in the short term while the price rises to a level capable of supporting more users.

[Manticore]

A few points and some personal experience:

You're cherry-picking the price spread: BTC is currently volatile but isn't ALWAYS on the pullback from a massive gain.

I'm a UK Bitpay merchant and one of the reasons I accept Bitcoin is because I know that generally, the price is going up.

Having had my business hampered by distrusting, greedy and inept merchant account providers I can safely say it is MUCH less hassle to accept BTC than credit cards. Funds can be held in reserve for up to 6 MONTHS. This is cashflow suicide.

I also accept PayPal. They charge 3% AND I get screwed again when I accept a PayPal payment in USD.

Fair assessment. I dislike Paypal. And I hate merchant accounts.

The problem isn't on the merchant side, it's on the customer side. The price will not go up forever and very few merchants can assume that risk.

And yes, but I didn't cherry-pick. I was writing the message while the price went from $166 to $153....then it went to $146.

I may sound negative but I am not bashing Bitcoin. I am involved in Bitcoin. I am very interested in Bitcoin and alt-coins.

I like playing the devil's advocate because everyone else (except for a select few) tends to cheerlead delusionally.

[Manticore]

The simple concept that seems to escape people is that when the exchange rate is higher, each dollar (or whatever) has a smaller effect on the market than the same dollar (or whatever) when the rate is lower.

At an exchange rate of $1000 to 1 BTC, bitcoin will be 100 times harder to push around than it was at $10.  Stability comes from size.  Size comes from adoption.

You can wish for stability without size, but your unicorn will show up sooner.  If you really want stability, you should be trying to find ways to increase adoption, which will lead to bigger swings in the short term while the price rises to a level capable of supporting more users.

Yes, size has potential to help (to what extent, who knows and what size will be required?). The price increase has come from hyper-speculation and hoarding. If it came solely from adoption, we would be at much lower levels and likely much more stable. I can't really knock the media, though, as it has provided profound support.

I understand the spirit of what you're saying; we're on the same side.

But foreign currency risk is very real and, although it doesn't matter as much now, it will matter very much in the future. It will become the biggest issue because the sole reason to invest is for 'Bitcoin the currency'. Without the future hope of a stable currency, there is no 'Bitcoin the speculative investment'. It is THE issue.

Point taken regarding unicorn. I want this to go to $1000 when fundamentals support it, not because the director of Citigroup issues a press release regarding his ownership of 10 bitcoins. At any rate, I've been somewhat hyper-critical. This will be interesting to watch.

[kjj]

What "fundamentals" do you mean?  Bitcoin is either an interesting, but forgettable experiment (value ~=0) or the future of all settlement (value ~=millions or more).  Expanding option 2 from settlement to payment could very easily kick the value up to billions.

People saving their coins are making a bet on the higher future value.  In doing so, they are both stabilizing and increasing the present value.  They are working towards the goal you say you want, and they are putting their own personal wealth at great risk to do so.

[TimJBenham]

And as much as I dislike Paypal, they offer completely free money transfers (non-purchase related, free for sender & receiver) that are certainly as easy if not easier than purchasing Bitcoin. They also offer very low international transfer rates (0.5% - 2%).

I sell Paypal USD on bitmit so I have some experience with this. Going AUD->USD I seem to get hit with more than that. Nor are my transfers free. The fee depends on where the receiver is registered, but 1% is typical. I make the buyer pay.

Generally your arguments are sound. As a mechanism for doing a fiat transaction Bitcoin is only a winner if you need to stay out of the gaze of the evil eye or you want to transfer a small amount irreversibly. Otherwise Paypal, credit card or bank wire will probably be cheaper, faster and easier than fiat->BTC->fiat. Non-scene merchants who accept Bitcoin are probably inspired by its price rise and don't convert back to fiat.

[Manticore]

What "fundamentals" do you mean?  Bitcoin is either an interesting, but forgettable experiment (value ~=0) or the future of all settlement (value ~=millions or more).  Expanding option 2 from settlement to payment could very easily kick the value up to billions.

People saving their coins are making a bet on the higher future value.  In doing so, they are both stabilizing and increasing the present value.  They are working towards the goal you say you want, and they are putting their own personal wealth at great risk to do so.

Fundamentals = adoption rate among merchants & consumers, for one, which are currently limited mainly to speculators (due to volatility).

Increase in size is not the magic bullet. Commodities account for about 10%+ of global GDP yet most markets are quite volatile. Commodity (which is probably what Bitcoin will one day be categorized) prices tend to be more volatile than many other prices in the economy because short term supply and demand are relatively price inelastic.

Bitcoin is more like gold/silver, obviously. Like Bitcoin currently, Gold derives its value primarily from hoarding (sentiment) and has mostly elastic demand (except in India, perhaps) and inelastic supply (like Bitcoin). Silver is more volatile because, aside from lower liquidity, its value oscillates from being derived as a store of value (hoarded; elastic demand) to that of its industrial use (or transactional use, in case of Bitcoin; inelastic demand). The oscillation between these two demands may be more pronounced for Bitcoin in the future, causing similar volatility. This effect is debatable, though, as most of the transactional demand produces an off-setting transaction through BitPay.

Hoarding, while needed to get to these price levels, makes it much less likely that it'll be stable at $1K per because the higher it goes, the more is hoarded, and the cycle continues until it doesn't, then restarts, etc. At $1K we will likely attract investors that are also 10 to 100 times larger, so I think it's extremely difficult to pinpoint the price level where volatility vanishes (and with mBTC, expect vol to continue due to psychology?). The kind of size needed to make Bitcoin less volatile is probably very large......like forex markets large......if it is to be a global transactional and speculative asset.

I have skin in the game on many different levels as well and am focused on adoption. The question is 'can Bitcoin get to forex markets size' before usability (foreign exchange risk) becomes a major issue and before speculators lose the belief that Bitcoin can become a stable currency?

[kjj]

Saving gives it value, not transacting.  This is true of all money, despite the nonsense that you hear about oil propping up dollars.

Bitcoin has value because people want to hold it.

Consider a random guy that hears about bitcoin, doesn't know anything about it, but decides to accept them as payment at his store.  He picks a service that accepts bitcoins for him and converts them into dollars to be deposited into his normal bank account.  This guy isn't directly propping up the value of bitcoins, because he isn't holding them.  The bitcoins that come to him are ferried off to an exchange, where they are sold to someone that wants to be holding bitcoins at that moment.  That guy with dollars (or whatever) on the exchange is directly propping up the value, because he is putting his actual wealth on the line to hold bitcoins.

Now, the guy with the store is helping indirectly, because the guy holding bitcoins is holding them because he expects that people transacting with them will be around in the future, and every vendor that accepts them increases the expectation of future value.

The exact same thing is true about the dollar.  FOREX markets are huge, liquid, and efficient, at least for big players.  No one is holding a currency against their will.  No one is holding dollars because they "need them to buy oil".  When they need to buy oil, it takes a couple of milliseconds to purchase the dollars they need, and has essentially zero transaction cost.  And the seller isn't stuck holding dollars either, because they can dump them in less time than it takes for your monitor to refresh.

Currency value comes from, and only from, the desire to hold that currency relative to other assets.

[2weiX]

I'm gonna cutnpaste your quote around a little because you just said in better words what I was trying to convey all allong but somehow couldn't phrase:

No one is holding dollars because they "need them to buy oil".  When they need to buy oil, it takes a couple of milliseconds to purchase the dollars they need, and has essentially zero transaction cost.  And the seller isn't stuck holding dollars either, because they can dump them in less time than it takes for your monitor to refresh.

That's where Bitcoin needs to go.
Highly effiicient, very liquid exchanges with very very low fees.

Saving gives it value, not transacting.  This is true of all money, despite the nonsense that you hear about oil propping up dollars.
Bitcoin has value because people want to hold it.
Currency value comes from, and only from, the desire to hold that currency relative to other assets.

This is ONLY the case with Bitcoin.
What other currencies get their value from is being the only means by which to pay taxes.
I don't wanna hold €, but I need some to pay my taxes with.

If Bitcoins value is based upon trust, what is that trust based upon? The hope that it will be useful sometime one day?

It is! It is used for transacting.

Me accepting BTC, BitPay-ing them for € on my bankaccount is exactly what Bitcoin is made for.
BitPay (et al.) providing liquidity on all exchanges is exactly how this should work.

Granted - overall cost of acquiring BTC should probably be lower, but we're on the right track.


One perfect example of this misunderstanding are the dolts demanding "bitcoin refunds" from BFL, Coinabul etc etc. They view Bitcoin as a store of value. It really isn't. As soon as you SPEND it, it becomes a means of transaction, of MOVING value.

[TimJBenham]

What "fundamentals" do you mean?  Bitcoin is either an interesting, but forgettable experiment (value ~=0) or the future of all settlement (value ~=millions or more). 

False dichotomy. There are other possible futures for Bitcoin, e.g. as an underground currency serving the needs of those whose transactions do not meet the states' requirements.

[dave111223]

At http://soccershirtsonline.com we accept bitcoin directly (not through Bitpay)...looks like we are in the 0.1% then?

[notme]

At http://soccershirtsonline.com we accept bitcoin directly (not through Bitpay)...looks like we are in the 0.1% then?

No, you don't exist.  Bitcoin is all speculators and drug dealers.

[600watt]

a service like bitpay is another point of where bitcoins can be changed to goods/fiat. there more connecting points like this (or for example the exchanges) where the btc world and the fiat world are in touch with each other, there more stable bitcoin will be.

a service like bitpay is as valuable as an exchange. it creates thousands of "small exchanges". a service like bitpay is essential for the existance of bitcoin.

a service like bitpay is the oxygen of the bitcoin habitat.