Will BTC's umbilical cord to USD eventually throttle it?

[ManBearPig]

This is a genuine question. I've been thinking a lot about how the ease of buying BTC with USD no doubt fuelled its uptake and eventual price spike. Things are changing now and again we have to look at the bottlenecks of global BTC uptake: a flaky exchange in the form of MtGox and an increasingly-hostile US government.

It seems to me that in the near future, a hedge against US meddling might be to have a European exchange which does NOT TOUCH USD but does business in EUR, BTC and perhaps LTC. Drop the dollar, drop the junkcoins.

Site it in Switzerland, Luxembourg, Malta, anyone of the financially-liberal countries which doesn't look like it's going to tank.

I wonder, though of course figures can only be guesses due to the mostly-anonymous architecture of cryptocurrencies, how many people who hold or trade BTC actually have USD bank accounts?

Half? More, less?

My point is I think there is enough non-USD fiat to support this kind of exchange. The days of thinking "international business" equals "USD" are slowly coming to an end, in fact, is this not core to the very idea of Bitcoin?

This is a brain dump really and I know there would be massive hills to climb to get something like this up and running but I fear that the land of the free will do all she can protect the position of the almighty dollar in the global economy and this would be a way to pre-empt that.

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[solex]

While the US pushes Bitcoin away, China is grabbing at it...

http://bitnodes.io/

Largest concentration of nodes, and near-monopoly on ASIC production.

[ManBearPig]

While the US pushes Bitcoin away, China is grabbing at it...

http://bitnodes.io/

Largest concentration of nodes, and near-monopoly on ASIC production.

Yes this has crossed my mind too and I wonder what will the Chinese government's response will be:

"It's a threat, kill it!" or "It's an opportunity, grab it!" ?

[gambitv]

Whats to stop a government making a NATIONAL Pool to try to grab a large slice of the bitcoin mining.

I think a lot of people find it very difficult to get 'cash' of any kind converted to bitcoins.

A recent exposure to the 'group buy' setup in NZ for some of those ASIC usb sticks has shown that there is interest in purchasing via bitcoins, but no easy way in short notice for newcomers to get hold of bitcoins.

[solex]

Consider what would be the rational / game theory response by Central Banks to Bitcoin when their investigative sub-committees confirm it as an existential threat.

The answer is to acquire a useful percentage of Bitcoin, or any similarly growing crypto-clone. With 21 million possible coins, 11 million issued, a CB representing a large economy could hedge against the new threat by acquiring between 500k and 1 million coins, and mining more. At $120 each this is pocket money to neutralize a novel threat.

Of course such an acquisition will quickly drive the fx rate up, perhaps into four figures. Still cheap for a CB to do this, especially as they can print fiat for their purchases!

How many CBs can do this though?  One or two, then the strategy fails as the rate goes stratospheric...

China's knows its yuan will not be a reserve currency for a long time, especially since they had hyperinflation as recently as the 1940s. It takes a very long time to earn this type of trust from the rest of the world. They are amassing gold in record amounts, but what strategy is better than having the largest Bitcoin holding as well. If fiat fades, then they are in pole position for the rest of the 21st Century.

[Lethn]

The problem with people predicting this buyout scenario is not only is it not realistic, they clearly don't understand how currencies work, if the federal reserve for instance decided to buy up lots of Bitcoins the price would most likely rise so high that it wouldn't be cost effective to buy anymore to keep competition away. They would also have to print more money in order to buy Bitcoin which would of course drastically affect the value of the dollar even more so it would be like with most hyperinflated currencies where you'd need 10 million dollars to buy 1 Bitcoin.

Adding to that, if they tried to keep Bitcoin out of the markets as much as possible then all people will do is switch to the alternative that is far easier to use and less restrictive and doesn't cost a fortune to transfer across the world, because of the deflationary nature of Bitcoin it seems very unlikely to me that any buyout attempt will succeed. The problem with many of these disaster scenarios is that the people predicting them keep making the mistake of treating Bitcoin as an inflationary currency that there is an infinite supply of which it is not.

The central banks of the world have been rigging the currency markets and artificially fixing prices and now thanks to deflation we're finally seeing just how much damage they've caused.

[jaywaka2713]

One of the major cons of decentralization is distribution of wealth. In any centralized country, you work and get paid in government money. With Bitcoin, those who can afford the most hardware get the most Bitcoins. Hashing is the ONLY way to get PAID in Bitcoin. Other people buy Bitcoin with dollars, as that is what the seller of Bitcoin is asking for it. The USD does not have an "umbilical cord" to Bitcoin. There are no other ways to acquire Bitcoin as well.

[ManBearPig]

Some great answers, thanks. Food for thought.

Yes at < $1.5B market cap, BTC could be a mere plaything for a malicious government though perhaps one with a sting in its tail.

I'm an avid reader of all things game theory related too and this is a fascinating scenario when seen in that context.

Since posting, I've noted with interest that Canada has had a small change of tact with regards to Bitcoin, backing up my suspicions that BTC could become a political hot potato.

Jaywaka: BTC is linked to USD in that people trade in that pair, regardless of whether they own USD. It represents a disproportionate fraction of the world's BTC trade when BTC/EUR would be a much better fit for millions of traders or those getting paid in BTC. MtGox right now the soft underbelly of Bitcoin and if we had a robust exchange away from US meddling then it would be less susceptible to collapse.

[Seal]

I agree with some of the earlier posts that in the western world we are seeking a skewed view and not taking account the large volume of trade that goes on in China and Russia in their respective currencies. For the rest of us, USD is a solid observation and indicator of health as a majority of the services built are done so in the most liquid market which in our case is USD.

[gopher]

This is a very skewed view, to imply that there is a umbilical cord between BTC and USD.

Lemme summarise couple of points to ponder:

1. Although most Bitcoin nodes are in China, the most BTC speculators are from US.

2. What defines the size of a market is not it's location, but the volume of currency-pairs traded on that market.

3. Mt Gox provides the largest number of markets, the one with the highest volume (by far) is the BTC/USD.

4. There are other smaller exchanges, who also offer the most popular pair, but their volumes are not that great.

5. US citizens form the largest group of BTC/USD speculators, no one stops them from trading any other currency-pair, but they have chosen that it is most convenient for them to trade for BTC/USD, deposit and withdraw in USD too.

6. There are myriad of traditional currency exchanges, some of them very good too (XE Forex comes to mind), but obviously people do not want to be bothered to trade currencies in multiple dimensions , example: trade BTC/USD, withdraw in XE wallet in USD, exchange that for EUR, trade EUR/AUD, deposit AUD to MtGox, trade AUD/BTC, profit!

7. Liquidity is king, at least in the speculator's land, hence that's what defines a good market.

8. With the blockage of Dwola, MtGox has found themselves with a challenge on their hands, but nothing so severe that they are not able to address (proven history of problem-solving) in time.

9. So, the real challenge is facing the US based speculators - if they want to trade the BTC/USD pair, the onus is on them to find an exchange that offers great liquidity and transaction volume in their choice of fiat, then they have to find efficient way to deposit and withdraw from that exchange.

10. No speculator cares about centralised/decentralised nature of the market, they are quite used to a centralised/regulated exchanges.

11. It takes time to react to any changes in environment, Rome was not build in one day.

Methinks...

[aigeezer]

Interesting thread. I enjoyed the pronoun anaphora resolution issue for "it" in the title "Will BTC's umbilical cord to USD eventually throttle it?"

[jaywaka2713]

Jaywaka: BTC is linked to USD in that people trade in that pair, regardless of whether they own USD. It represents a disproportionate fraction of the world's BTC trade when BTC/EUR would be a much better fit for millions of traders or those getting paid in BTC. MtGox right now the soft underbelly of Bitcoin and if we had a robust exchange away from US meddling then it would be less susceptible to collapse.

I think something like that is a very important step that needs to completed very soon. The US Govt is cracking down on Bitcoin already.

[ManBearPig]

1. Although most Bitcoin nodes are in China, the most BTC speculators are from US.

Can you provide a reference for this please?

You would also need to back this up by proving most people using BTC are speculators.

I don't think you understand my point as well as other contributors to this thread.

The reason the BTC/USD pair is the most traded is because all of the trade flocks to the pair with the most liquidity. There was a lot more BTC/GBP trading on MtGox before the spike. Are you suggesting there are a lot less British BTC holders now than a month ago?

[kodo]

Yes, its a possibility.

[benjamindees]

Not really "throttle" I'd say, but there is going to be a big speed bump when the connection is finally broken.

[kodo]

Yes probably

[ManBearPig]

Interesting thread. I enjoyed the pronoun anaphora resolution issue for "it" in the title "Will BTC's umbilical cord to USD eventually throttle it?"

Indeed, this is a "nice" way to form a sentence. And BTW, given how vague it is we must assume that "it" relates to the closest subject i.e. USD.

Then clearly you skipped your English classes!

[ManBearPig]

It's clear the world is thinking the same, as of the last few days we are seeing new exchanges and existing online payment processors moving into BTC and avoiding the dollar.

The world's a rapidly-changing place: if Bitcoin makes it will be to a certain point at the expense of the dollar.

Not every dollar has an American behind it and its days as the world's currency are numbered IMHO.

[Stampbit]

Will rice production eventually throttle BTC?

[ruletheworld]

Whats to stop a government making a NATIONAL Pool to try to grab a large slice of the bitcoin mining.

I think a lot of people find it very difficult to get 'cash' of any kind converted to bitcoins.

A recent exposure to the 'group buy' setup in NZ for some of those ASIC usb sticks has shown that there is interest in purchasing via bitcoins, but no easy way in short notice for newcomers to get hold of bitcoins.

Umm, more than half the Bitcoins that will ever go into production are already out there in the hands of people (about 11 million out of 21 million).

[gambitv]

Yes, ruletheworld and your point being? As my comment states, newcomers don't have an easy time of it. We are too late to mine, don't have shares 'generating' bitcoin as dividends, only have cash/credit-card/PayPal as options to buy. Trying to get large volumes of coins quickly is not easy.

Why did mineforman go out of his way to help people acquire bitcoins for his group buy?

But I have confidence in the currency, especially with seeing protests on the BBC this morning in many parts of the world against government 'austerity' measures. What is austerity anyway... Gov just deciding to work within their budget? Why are so many reliant on government jobs or handouts? Why not get a real job like the rest of us. But that is another topic altogether, and probably not a popular opinion.

Whats to stop a government making a NATIONAL Pool to try to grab a large slice of the bitcoin mining.

I think a lot of people find it very difficult to get 'cash' of any kind converted to bitcoins.

A recent exposure to the 'group buy' setup in NZ for some of those ASIC usb sticks has shown that there is interest in purchasing via bitcoins, but no easy way in short notice for newcomers to get hold of bitcoins.

Umm, more than half the Bitcoins that will ever go into production are already out there in the hands of people (about 11 million out of 21 million).

[jubalix]

Some great answers, thanks. Food for thought.

Yes at < $1.5B market cap, BTC could be a mere plaything for a malicious government though perhaps one with a sting in its tail.

I'm an avid reader of all things game theory related too and this is a fascinating scenario when seen in that context.

Since posting, I've noted with interest that Canada has had a small change of tact with regards to Bitcoin, backing up my suspicions that BTC could become a political hot potato.

Jaywaka: BTC is linked to USD in that people trade in that pair, regardless of whether they own USD. It represents a disproportionate fraction of the world's BTC trade when BTC/EUR would be a much better fit for millions of traders or those getting paid in BTC. MtGox right now the soft underbelly of Bitcoin and if we had a robust exchange away from US meddling then it would be less susceptible to collapse.

no because the more the try to buy the higher the price gets, until they run out of money,
one_simply_can't_buy_bitcoins_into_submission_boromir.jpg

[jubalix]

Interesting thread. I enjoyed the pronoun anaphora resolution issue for "it" in the title "Will BTC's umbilical cord to USD eventually throttle it?"

a reparticualist I see

[ruletheworld]

Yes, ruletheworld and your point being? As my comment states, newcomers don't have an easy time of it. We are too late to mine, don't have shares 'generating' bitcoin as dividends, only have cash/credit-card/PayPal as options to buy. Trying to get large volumes of coins quickly is not easy.

Why did mineforman go out of his way to help people acquire bitcoins for his group buy?

But I have confidence in the currency, especially with seeing protests on the BBC this morning in many parts of the world against government 'austerity' measures. What is austerity anyway... Gov just deciding to work within their budget? Why are so many reliant on government jobs or handouts? Why not get a real job like the rest of us. But that is another topic altogether, and probably not a popular opinion.

Whats to stop a government making a NATIONAL Pool to try to grab a large slice of the bitcoin mining.

I think a lot of people find it very difficult to get 'cash' of any kind converted to bitcoins.

A recent exposure to the 'group buy' setup in NZ for some of those ASIC usb sticks has shown that there is interest in purchasing via bitcoins, but no easy way in short notice for newcomers to get hold of bitcoins.

Umm, more than half the Bitcoins that will ever go into production are already out there in the hands of people (about 11 million out of 21 million).

My point being it isn't going to be easy for any government to to set up a massive mining ring and try to manipulate Bitcoin. The Bitcoin network already has more processing power than the top 500 supercomputers.

Even if cash is the only option to get Bitcoin now, it's value is purely supply-demand based. How do you know we are too late to the game? It is hard to predict the future demand for something like Bitcoin.

[niothor]

My point being it isn't going to be easy for any government to to set up a massive mining ring and try to manipulate Bitcoin. The Bitcoin network already has more processing power than the top 500 supercomputers.

Even if cash is the only option to get Bitcoin now, it's value is purely supply-demand based. How do you know we are too late to the game? It is hard to predict the future demand for something like Bitcoin.

Lets not get into this but the total computing power of the network is 0 FLOPS. Unless there is still somebody  cpu mining