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Author Topic: Out in the wild - people think Bitcoins will drop to 0  (Read 7111 times)
FlipPro
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June 22, 2011, 05:02:09 AM
 #21

Your graph hasn't done anything to demonstrate that your assertion that price follows difficulty is correct.

Majority of buyers don't give a shit about mining difficulty/costs, and so it doesn't factor in to what they're willing to pay. Higher mining costs might cause more miners to hold on to what they mine, marginally affecting supply (the coins mined each day are a tiny fraction of the coins that change hands every day), but at the end of the day a Bitcoin is only worth whatever you can sell it to someone for.

And there's always gonna be some punk kid at college in a dorm with 3 5970s who doesn't care about his costs and just wants a dimebag. Unk, Angelus and others are therefore correct - the price doesn't follow difficulty.
Are we looking at the same chart sir? Have you not seen the trend? As the difficulty goes up SO HAS THE PRICE. Do I have to EXPLAIN the graph to you?

EDIT:Miners are only going to sell their coins for whatever THEY think they're worth.. If people don't like their prices, then they can't participate in the new bitcoin market, simple as that.. And whats wrong with college students running 5970's? Anyone should be able to mine, it shouldn't be restricted to the super nerdy, or the elite. Are you serious?

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unk
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June 22, 2011, 05:09:01 AM
 #22

well, this has all already been debated ad nauseam, so let me try to make a somewhat different claim that might be novel:

there's little evidence that any advice to buy or sell ever posted in this forum has influenced the short-term price of bitcoins.

maybe that should suggest that people stop wasting their time trying ineffectively to manipulate the market - on both sides, of course!
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June 22, 2011, 05:10:11 AM
 #23

well, this has all already been debated ad nauseam, so let me try to make a somewhat different claim that might be novel:

there's little evidence that any advice to buy or sell ever posted in this forum has influenced the short-term price of bitcoins.

maybe that should suggest that people stop wasting their time trying ineffectively to manipulate the market - on both sides, of course!

When I predicted the price would go to 0, even making a whole thread about it, it actually did 2 days later. So you are completely wrong.
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June 22, 2011, 05:13:18 AM
 #24

Are we looking at the same chart sir? Have you not seen the trend? As the difficulty goes up SO HAS THE PRICE. Do I have to EXPLAIN the graph to you?

Correlation != causation. Difficulty jumped what, 60% last time, yet we're at lower prices than we were last period. Why aren't miners holding onto their coins until prices increase?

I'll answer you: because miners don't get to set the fuckin' price.

Quote
EDIT:Miners are only going to sell their coins for whatever THEY think they're worth.. If people don't like their prices, then they can't participate in the new bitcoin market, simple as that.. And whats wrong with college students running 5970's? Anyone should be able to mine, it shouldn't be restricted to the super nerdy, or the elite. Are you serious?

Relax. I'm not being elitist, I'm merely pointing out that most kids in dorm rooms don't typically pay directly for utility bills - in their mind the electricity is "free". If they already put together the box with part of their student loan money or grant money, then in their mind they have no "costs" involved and therefore they will always mine cheaper than you or I will.

So you aren't going to have any collusion between miners to not sell their BTC below a certain threshold, and even if you did - as I said, newly minted Bitcoins make up a tiny fraction of the BTC that change hands each day, so the effect on the market would be negligible.

You can point out the trend all you like, but betting the farm on the fact that the price is going to follow difficulty to the sky is a fool's bet.

^_^
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June 22, 2011, 05:19:39 AM
 #25

Are we looking at the same chart sir? Have you not seen the trend? As the difficulty goes up SO HAS THE PRICE. Do I have to EXPLAIN the graph to you?

Correlation != causation. Difficulty jumped what, 60% last time, yet we're at lower prices than we were last period. Why aren't miners holding onto their coins until prices increase?

I'll answer you: because miners don't get to set the fuckin' price.

Quote
EDIT:Miners are only going to sell their coins for whatever THEY think they're worth.. If people don't like their prices, then they can't participate in the new bitcoin market, simple as that.. And whats wrong with college students running 5970's? Anyone should be able to mine, it shouldn't be restricted to the super nerdy, or the elite. Are you serious?

Relax. I'm not being elitist, I'm merely pointing out that most kids in dorm rooms don't typically pay directly for utility bills - in their mind the electricity is "free". If they already put together the box with part of their student loan money or grant money, then in their mind they have no "costs" involved and therefore they will always mine cheaper than you or I will.

So you aren't going to have any collusion between miners to not sell their BTC below a certain threshold, and even if you did - as I said, newly minted Bitcoins make up a tiny fraction of the BTC that change hands each day, so the effect on the market would be negligible.

You can point out the trend all you like, but betting the farm on the fact that the price is going to follow difficulty to the sky is a fool's bet.
The only reason the market is in the dumps is because of recent hackings, scrutiny by the media, and bitcoins sudden thrust into the main stream. In the future when more people sign on to bitcoin, and the technology is truly understood. People will only have a few things to go by when looking into bitcoins value.

Which are:
1. How many coins are currently in existence. (Supply)
2. How interchangeable is the currency itself. (Businesses and Exchanges, and overall DEMAND)
3. How hard is it to make new currency (MINING).

Other than that everything else is hog wash.

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elggawf
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June 22, 2011, 05:33:33 AM
 #26

The only reason the market is in the dumps is because of recent hackings, scrutiny by the media, and bitcoins sudden thrust into the main stream. In the future when more people sign on to bitcoin, and the technology is truly understood.

Keep telling yourself that your simple supply/demand calculations are going to prove that price will follow difficulty, and that people who are newly investing in Bitcoin will pay whatever the miners demand.

You'd do well to note that the first price slump of the last month or so was simply caused by an early adopter cashing out (no hacking, no sudden media attention or scrutiny, and no misunderstandings of the tech) - again, someone will always mine cheaper than you or I.

Miners don't get to set the price - the price is what people are willing to buy them for.

^_^
asdf
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June 22, 2011, 05:39:41 AM
 #27

Er... difficulty follows price, right? Isn't this obvious.

Value increase -> mining becomes more profitable -> more miners -> higher difficulty

This is so trivial, I can't believe there is so much debate about it. Miners may have some small influence on the market when they sell their bitcoins, but surely real demand + speculation is driving the price, which, in turn, drives difficulty by the mechanism I described.
AngelusWebDesign
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June 22, 2011, 06:00:47 AM
 #28

There are a lot of factors in play, yes, but we need to keep in mind that there's no direct pull on a BTC buyer to pay more because Joe Miner only makes 2 BTC/day today, whereas he made 4 BTC/day last week.

The SAME NUMBER OF BITCOINS are produced every week, regardless of how many miners participate in the bounty.

Print that out, put it on your wall. It cuts to the essence of this "difficulty" controversy.
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June 22, 2011, 06:25:28 AM
 #29

There are a lot of factors in play, yes, but we need to keep in mind that there's no direct pull on a BTC buyer to pay more because Joe Miner only makes 2 BTC/day today, whereas he made 4 BTC/day last week.

The SAME NUMBER OF BITCOINS are produced every week, regardless of how many miners participate in the bounty.

Print that out, put it on your wall. It cuts to the essence of this "difficulty" controversy.

Here me out I'm going to use your logic here.

If the same amount of bitcoins are made every week, but the number of miners increases then what happens? We form  DEMAND for a finite resource, thus making the coins even more valuable.  If people want it, it doesn't matter what me or anyone else says, the price is going up. Maybe the demand will very well be sparked by the miners themselves, but demand is demand nonetheless.

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elggawf
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June 22, 2011, 06:54:13 AM
 #30

Here me out I'm going to use your logic here.

If the same amount of bitcoins are made every week, but the number of miners increases then what happens? We form  DEMAND for a finite resource, thus making the coins even more valuable.  If people want it, it doesn't matter what me or anyone else says, the price is going up. Maybe the demand will very well be sparked by the miners themselves, but demand is demand nonetheless.

Move miners from the supply side to the demand side to suit your hypothesis... brilliant!

This type of shit is the reason certain people laugh when you mention Bitcoins.

^_^
Justsomeforumuser
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June 22, 2011, 08:00:18 AM
 #31

Actually people laugh when they see a completely unbacked thing being called currency(plus talks of a BTC "economy" that exists only in forum threads) and expecting something to be worth 30$ (that's the number kicked around here, some have ofc already mentioned 100$ and whatnot) that cost between 0.5-2$ to "make"/hash.


To make dimensions clear: MtGox had 90+% of total trade volume. They had 60k users. That's about as much as 2-3 tribes on a small island that decide to use seashells as money.

That's your current "internet revolution".

Ho-Hum.
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June 22, 2011, 08:21:00 AM
 #32

There are a lot of factors in play, yes, but we need to keep in mind that there's no direct pull on a BTC buyer to pay more because Joe Miner only makes 2 BTC/day today, whereas he made 4 BTC/day last week.

The SAME NUMBER OF BITCOINS are produced every week, regardless of how many miners participate in the bounty.

Print that out, put it on your wall. It cuts to the essence of this "difficulty" controversy.

Here me out I'm going to use your logic here.

If the same amount of bitcoins are made every week, but the number of miners increases then what happens? We form  DEMAND for a finite resource, thus making the coins even more valuable.  If people want it, it doesn't matter what me or anyone else says, the price is going up. Maybe the demand will very well be sparked by the miners themselves, but demand is demand nonetheless.

Regardless of the other arguments going on, I just have contention with you saying that bitcoins are a finite resource when you really mean that production is finite and predictable. Well, mostly so, at least, as rapid growth can make the 1 block/10 minutes target quite a bit shorter.

In other words, staying with the bounds of your argument, there would need to be an increase in miners equivalent to the creation of new bitcoins just to maintain the same level of demand.

Of course then we can argue that more miners means more network power, which means higher difficulty, which might or might not cause or be caused by increasing exchange value, which brings in new non-mining investors, which kills the duck that ate the bug that stung the man which built the home which houses the family that murdered each other in cold blood after one too many nursery rhymes.

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June 22, 2011, 08:26:47 AM
 #33

..for some reason they think the value could reach 0 again! 

The evidence is to the contrary. For Bitcoin to have got thru the last 2 weeks and hold its value at 15 is ample proof of its resilience.
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June 22, 2011, 08:32:23 AM
 #34

Value increase -> mining becomes more profitable -> more miners -> higher difficulty

Fixed it for you Wink



This image represents why it's funny to see people arguing about it.

bitrebel
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June 22, 2011, 08:46:53 AM
 #35

hahaha, If Bitcoins dropped to zero, I would just buy them all up, and it would cost me ZERO!

Why does Bitrebel have 65+ Ignores?
Because Bitrebel says things that some people do not want YOU to hear.
unk
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June 22, 2011, 09:04:28 AM
 #36

This image represents why it's funny to see people arguing about it.

you're simply assuming your conclusion. the very proposition in dispute is that the step from 'higher difficulty' to 'value increases' reflects a causal process.

there is very little reason to think that a causal process exists for that particular step. of course, it is impossible to rule it out in practice, because it could reflect a complex psychological or economic phenomenon. that is why i say it requires empirical support. but it has no theoretical support.

without any empirical grounding, all people are doing is offering entirely unjustified conjecture for that step in your 'cycle'. by contrast, more than base conjecture is available for the other steps of the cycle, for it makes perfect sense that more resources will be devoted to mining if it is more profitable for people to do so.

this is, as asdf has said, extremely obvious. it is a trivial analysis. that the confusion persists is baffling.
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June 22, 2011, 10:14:35 AM
 #37

The reason why it won't happen is because the difficulty level keeps going up, so every day it becomes more and more expensive to mine, thus giving the coins value through their creators.

you say this many times, but it's simply incorrect except as a complex psychological matter that, as applied to any specific context, requires empirical validation.

http://en.wikipedia.org/wiki/Sunk_costs

you've also claimed that difficulty cannot go down; this is incorrect too. it can and has.

Economics is a complex psychological matter.

Sunk costs slowly drives price, that's my belief. But the effect of difficulty on prices is overshadowed by the more rapid effect of price on difficulty. It's like how stars work, a contest between gravity and heat, gravity as the weaker force but still has its effect.

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June 22, 2011, 11:04:23 AM
 #38

Let them sell. Right now we are rounding up all the sheep and sending them to slaughter.

Their loss is my gain.

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June 22, 2011, 12:36:14 PM
 #39

- There are those of us who are holding on the the BTC we mine until the cows come home.  Those people do not affect the price.
- There are other miners who do sell BTC from time to time.  Chances are, they're out to make a certain profit on the equipment they purchased.  Those people do affect the price.  Their desire to sell at a certain price is based in part on the difficulty of mining those BTC, and the expectation of being able to recoup the sale through mining, given the current difficulty.

So in short, current difficulty is not THE factor for pricing, but it is A factor.
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June 22, 2011, 01:11:18 PM
 #40

it makes perfect sense that more resources will be devoted to mining if it is more profitable for people to do so.

You say chicken, I say egg.

The reason I generally don't take sides in the argument "Does difficulty drive price, or does price drive difficulty?" is because I think it's both.

That's why I find it funny to see people so adamant that their view is 'correct' and the opposition's 'incorrect'.

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