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Author Topic: Why bitcoins are dropping, and will continue to do so  (Read 25694 times)
5grainsilver
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July 05, 2011, 12:24:09 AM
 #1

And why the bitcoin value is entirely dependent on the black market. 

It is simple supply and demand.  Lets look at each side. 

Supply:

Supplied by miners.  Any serious operation NEEDS to sell to pay utilities.  That creates a steady supply of bitcoins offered at market price on a regular basis. 

Demand: 

Reasons to buy.

1.  Investment.  Nope.  Not in any real amounts.  Investors like security and the bitcoin is pretty much the opposite of secure.  They also like secure exchanges and the bitcoin exchanges are pretty shady compared to mainstream exchanges.  That is kind of an understatement really. 

2.  To use as a transactional currency.  This is the real appeal of the bitcoin.  But there is no reason for someone to convert dollars to bitcoins and buy something unless it is illegal.  It is inconvenient and provides zero protection against theft or fraud. 

That leaves us with a large, steady supply regardless of price, and limited demand based on black market products. 

I wish I could short bitcoins.       
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AyeYo
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July 05, 2011, 01:04:04 AM
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And why the bitcoin value is entirely dependent on the black market. 

It is simple supply and demand.  Lets look at each side. 

Supply:

Supplied by miners.  Any serious operation NEEDS to sell to pay utilities.  That creates a steady supply of bitcoins offered at market price on a regular basis. 


That alone is what kills it at this point.  Everyone is still using this a profit making game, which means all mined coins are getting sold off for market price.


Bottom line: almost no one wants Bitcoins for Bitcoin's sake.  People want Bitcoins to sell for dollars now or later, or they want them to purchase illegal items.  That's really all they're used for right now and it's unfortunate.

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July 05, 2011, 01:08:11 AM
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Supply:

Supplied by miners.  Any serious operation NEEDS to sell to pay utilities.  That creates a steady supply of bitcoins offered at market price on a regular basis. 
No they are introduced by miners, and supplied by miners and anyone holding Bitcoins.  Supply is not a problem.
Quote
Reasons to buy.

1.  Investment.  Nope.  Not in any real amounts.  Investors like security and the bitcoin is pretty much the opposite of secure.  They also like secure exchanges and the bitcoin exchanges are pretty shady compared to mainstream exchanges.  That is kind of an understatement really. 
Bitcoin is not intended as a get-rich-quick scheme, if it makes you money for nothing, that's great for you, if it doesn't it's not a flaw because it was never intended to.
Quote
2.  To use as a transactional currency.  This is the real appeal of the bitcoin.  But there is no reason for someone to convert dollars to bitcoins and buy something unless it is illegal.  It is inconvenient and provides zero protection against theft or fraud. 
There are many reasons other than illicit goods.
They are cheaper to move.  Visa and Mastercard take several percent off of each transaction that is done with them.  Considering profits for most merchants is severa percent, after all expenses, eliminating Visa and Mastercard from the equation can mean saving a lot of money.
kiwiasian
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July 05, 2011, 01:08:29 AM
 #4

^Yes, that is what BTC is for. Mine it, sell it, profit REAL money and not virtual worthless currency.

*Now, all the hardcore BTC economists are going to come in and tell me about fiat currency and how bitcoins are better, amongst other things that in the end no one cares about*

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July 05, 2011, 01:11:32 AM
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And why the bitcoin value is entirely dependent on the black market. 

It is simple supply and demand.  Lets look at each side. 

Supply:

Supplied by miners.  Any serious operation NEEDS to sell to pay utilities.  That creates a steady supply of bitcoins offered at market price on a regular basis. 


That alone is what kills it at this point.  Everyone is still using this a profit making game, which means all mined coins are getting sold off for market price.


Bottom line: almost no one wants Bitcoins for Bitcoin's sake.  People want Bitcoins to sell for dollars now or later, or they want them to purchase illegal items.  That's really all they're used for right now and it's unfortunate.

Yes, many new people are investing for this reason, but this isn't that bad.  It gives Bitcoins a lot of press and attracts people who do want to use it.

A lot of non-internet merchants are popping up.  There may only be ~10, some restaurant here, some cake shop there, but most of them just opened up, and others are bound to follow.  I bet many local people will see the money saved on transactions and want to join in as well.

You can't ignore the legitimate vendors using it.  A quick look at the marketplace on these forums here will show you how popular it is for legal, non-investment purposes.  Being able to wire money without involving a bank, and all kinds of fees and wait times is very useful to a lot of people.
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July 05, 2011, 01:12:52 AM
 #6

according to falkvinge:

1.) unlawfull trade
2.) international trade
3.) merchant trade
4.) investment (not yet released)

in that order

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July 05, 2011, 01:13:34 AM
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1.  Investment.  Nope.  Not in any real amounts.  Investors like security and the bitcoin is pretty much the opposite of secure.  They also like secure exchanges and the bitcoin exchanges are pretty shady compared to mainstream exchanges.  That is kind of an understatement really.      
It may not be completely reliable, but it offers a staggering degree of potential profit. And VirWoX is very trusted. If you really want security (and the ability to use PayPal), then VirWoX is a valid choice, but the fees will probably be higher.

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July 05, 2011, 01:14:00 AM
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^Yes, that is what BTC is for. Mine it, sell it, profit REAL money and not virtual worthless currency.

*Now, all the hardcore BTC economists are going to come in and tell me about fiat currency and how bitcoins are better, amongst other things that in the end no one cares about*

Try to quote instead of putting an arrow, it's ambiguous, who are you talking to?  There are two people above that post, this is what the quoting feature is for.

And it look like you are denying the market place that exploded in activity recently.  More real life merchants are popping up, and people are selling random goods on these very forums.  Pretending these don't exist is delusional.
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July 05, 2011, 01:17:24 AM
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Supply:

Supplied by miners.  Any serious operation NEEDS to sell to pay utilities.  That creates a steady supply of bitcoins offered at market price on a regular basis.  
No they are introduced by miners, and supplied by miners and anyone holding Bitcoins.  Supply is not a problem.

I must object. High supply is a problem if you want the price not to drop (which is implied by OP). A lot of miners decided to join when the price was at $30. They mostly joined for a quick buck, not because of bitcoin and it's features (see troll post above). These people have to throw their mined coins to the market, to recoup their investment and pay utility bills.

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July 05, 2011, 01:19:05 AM
 #10

There is no reason for any individual to have a computer in their home. - Ken Olson (President of Digital Equipment Corporation) at the Convention of the World Future Society in Boston in 1977

Only two things are infinite, the universe and human stupidity, and I’m not sure about the former. - Albert Einstein

If you don't own the private keys, you don't own the coins.
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July 05, 2011, 01:19:10 AM
 #11

^Yes, that is what BTC is for. Mine it, sell it, profit REAL money and not virtual worthless currency.
Please explain why it is more worthless than a currency which can be continually created from thin air and injected into the money pool whenever a minority decide upon it. The real worthless currency is one which is completely centralized and heavily taxed. The real worthless currency is one which can be produced en mass from paper grown on trees. That's right, money does grow on trees.

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July 05, 2011, 01:20:31 AM
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I must object. Hight supply is a problem if you want the price not to drop (which is implied by OP). A lot of miners decided to join when the price was at $30. They mostly joined for a quick buck, not because of bitcoin and it's features (see troll post above). These people have to throw their mined coins to the market, to recoup their investment and pay utility bills.

But people are continuing to mine, the network hasn't stopped running because a few decided to stop.  Even after the cap is hit, transaction fees will get people to keep mining.
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July 05, 2011, 01:21:10 AM
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^Yes, that is what BTC is for. Mine it, sell it, profit REAL money and not virtual worthless currency.
Please explain why it is more worthless than a currency which can be continually created from thin air and injected into the money pool whenever a minority decide upon it. The real worthless currency is one which is completely centralized and heavily taxed. The real worthless currency is one which can be produced en mass from paper grown on trees. That's right, money does grow on trees.

Actually money (US money at least) is made from cotton.
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July 05, 2011, 01:23:07 AM
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^Yes, that is what BTC is for. Mine it, sell it, profit REAL money and not virtual worthless currency.
Please explain why it is more worthless than a currency which can be continually created from thin air and injected into the money pool whenever a minority decide upon it. The real worthless currency is one which is completely centralized and heavily taxed. The real worthless currency is one which can be produced en mass from paper grown on trees. That's right, money does grow on trees.

Actually money (US money at least) is made from cotton.
And what is cotton made from? Plants? Ok, money grows on plants. Haha.

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July 05, 2011, 01:29:06 AM
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I must object. Hight supply is a problem if you want the price not to drop (which is implied by OP). A lot of miners decided to join when the price was at $30. They mostly joined for a quick buck, not because of bitcoin and it's features (see troll post above). These people have to throw their mined coins to the market, to recoup their investment and pay utility bills.

But people are continuing to mine, the network hasn't stopped running because a few decided to stop.  Even after the cap is hit, transaction fees will get people to keep mining.

I didn't say anyone stopped mining. Mining is still profitable, even at an exchange rate of $5. I said many miners must sell their mined coins.

Just 3-4 months ago, one could mine 20 BTC per day with a €700 EUR machine. You need something like 20 GHash/s for that nowadays, that'll cost you $10.000, and if you look in this thread (watch out, hardware/cable porn): http://forum.bitcoin.org/index.php?topic=7216.msg321184#msg321184, you can see that people are doing this.

I don't think they make such an investment with some "spare fiat money" they have laying around and then just keep the coins, they sell them.

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July 05, 2011, 01:39:10 AM
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^Yes, that is what BTC is for. Mine it, sell it, profit REAL money and not virtual worthless currency.
Please explain why it is more worthless than a currency which can be continually created from thin air and injected into the money pool whenever a minority decide upon it. The real worthless currency is one which is completely centralized and heavily taxed. The real worthless currency is one which can be produced en mass from paper grown on trees. That's right, money does grow on trees.

I'll PM you Paypal address and you can send me all your worthless dollars.  Thanks.

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5grainsilver
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July 05, 2011, 01:39:28 AM
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1.  Investment.  Nope.  Not in any real amounts.  Investors like security and the bitcoin is pretty much the opposite of secure.  They also like secure exchanges and the bitcoin exchanges are pretty shady compared to mainstream exchanges.  That is kind of an understatement really.      
It may not be completely reliable, but it offers a staggering degree of potential profit. And VirWoX is very trusted. If you really want security (and the ability to use PayPal), then VirWoX is a valid choice, but the fees will probably be higher.

I really disagree with the bitcoins as an investment angle.  There is too much of a chance for bitcoin to basically go to zero.  Government intervention would do it.  If anyone really had a sizeable account they would be an awesome target for organized crime.  There are so many good ways to invest money I just don't see anyone with a chunk of money wanting to put it into bitcoin.  
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July 05, 2011, 01:43:11 AM
 #18

I wish I could short bitcoins.       

Who would lend you bitcoins to short? 

I think that the only way to make money speculating on bitcoin value while the bubble deflates is to buy when you think prices have bottomed.
Good luck.
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July 05, 2011, 01:43:57 AM
 #19

I wish I could short bitcoins.       

Who would lend you bitcoins to short? 


I got a 200 BTC loan a month or two ago that I just shorted. It was fun but I barely made it out alive.
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July 05, 2011, 01:50:13 AM
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1.  Investment.  Nope.  Not in any real amounts.  Investors like security and the bitcoin is pretty much the opposite of secure.  They also like secure exchanges and the bitcoin exchanges are pretty shady compared to mainstream exchanges.  That is kind of an understatement really.      
It may not be completely reliable, but it offers a staggering degree of potential profit. And VirWoX is very trusted. If you really want security (and the ability to use PayPal), then VirWoX is a valid choice, but the fees will probably be higher.

I really disagree with the bitcoins as an investment angle.  There is too much of a chance for bitcoin to basically go to zero.  Government intervention would do it.  If anyone really had a sizeable account they would be an awesome target for organized crime.  There are so many good ways to invest money I just don't see anyone with a chunk of money wanting to put it into bitcoin.  


I think the #1 reason there isn't more investment is that there is no safe, transparent exchange.  If I could buy/sell Bitcoin through ETrade, I'd be all over it.  I'm not touching MtHax or ScamHill with a ten foot pole.

Enjoying the dose of reality or getting a laugh out of my posts? Feel free to toss me a penny or two, everyone else seems to be doing it! 1Kn8NqvbCC83zpvBsKMtu4sjso5PjrQEu1
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