Why bitcoins are dropping, and will continue to do so

[5grainsilver]

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.       

[1715263487]

1715263487

[AyeYo]

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.

[Arrow]

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.

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.

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]

^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*

[Arrow]

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.

[molecular]

according to falkvinge:

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

in that order

[bitfreak!]

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.

[Arrow]

^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.

[molecular]

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.

[gusti]

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

[bitfreak!]

^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.

[Arrow]

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.

[Arrow]

^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.

[bitfreak!]

^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.

[molecular]

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.

[AyeYo]

^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.

[5grainsilver]

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.  

[SlipperySlope]

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.

[Anonymous]

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.

[AyeYo]

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.

[Arrow]

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.

Yes, miners sell coins.  What is your point?  How is this a mark against Bitcoins at all?

Oh no, gold miners sell gold!!!  Gold will fail!!

Honestly, what point are you trying to make?

[AyeYo]

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.

Yes, miners sell coins.  What is your point?  How is this a mark against Bitcoins at all?

Oh no, gold miners sell gold!!!  Gold will fail!!

Honestly, what point are you trying to make?

It's too hard to understand.  Nearly all new coins generated are sold.  That means there's a steady supply of coins being sold at market price.  If there isn't demand to meet that constant influx of sellers (and there isn't), then the price drops.

[Arrow]

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.

Yes, miners sell coins.  What is your point?  How is this a mark against Bitcoins at all?

Oh no, gold miners sell gold!!!  Gold will fail!!

Honestly, what point are you trying to make?

It's too hard to understand.  Nearly all new coins generated are sold.  That means there's a steady supply of coins being sold at market price.  If there isn't demand to meet that constant influx of sellers (and there isn't), then the price drops.

Yes, but remember that demand is increasing, very fast- more merchants are accepting it now than ever before.  Not even just online, but in physical shops.

And as for the supply, that will slow down as the difficulty increases, and ultimately when it caps off.

[5grainsilver]

Gold is different because there are a lot of good reasons to buy gold.  Not gonna bother listing them. 

Just because merchants are accepting bitcoin doesn't mean people are going out and buying bitcoins to spend at said merchants.  And guess what those merchants are doing a soon as they receive bitcoins as payment for goods and services?

[Bonkers]

I'm pretty sure the same argument came up when Eftpos was first introduced.

"Why would I want to take around these cards to pay for things, nobody has any machines and cash is so much easier.."

Once the tech starts rolling out paying in BTC will be as easy as using your credit / eftpos card.  

Over the short term (12 - 24 months) yes I think you're correct, bitcoin will probably hover around its current exchange rate, because it is too inconvenient to use and there's no real reason to. But I think most of us care more about the long term outlook.

As a merchant from Australia selling software online I really want people to use Bitcoin, and will start offering discounts soon for people to use it. Since I started online paypal has been a huge thorn in my side, taking large transaction fees, huge currency exchange fees from USD -> AUD and having lots of "Buyer security" on software (basically meaning a buyer can request a refund for any reason and keep the software and there's nothing I can do about it because according to Paypal you can't prove you sent a digital product).

[Arrow]

Gold is different because there are a lot of good reasons to buy gold.  Not gonna bother listing them. 

Compelling argument.

However gold isn't valuable because of it's intrinsic value, which is less than steel, but because of it's scarcity which gives it an actual value that is very high.

Just because merchants are accepting bitcoin doesn't mean people are going out and buying bitcoins to spend at said merchants.

With Silk Road people have.

As for the other services, what they want isn't necessarily listed.

And guess what those merchants are doing a soon as they receive bitcoins as payment for goods and services?

Convert it into Bitcoin, obviously because the market is new, and not very large.

As the market expands people will convert their BTC to USD less often, and a large portion of bitcoins can be spent on whatever it is they need.

There will be a lot of conversion at first, and then people will find the things they need still in the Bitcoin market, it's simple.

[Bitcoin Swami]

Weather you agree with gambling or not, I think that the gambling aspect of Bitcoins (especially texas holdem) will give it a solid foundation at least.

[kjj]

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. 

You've clearly never purchased anything using bitcoins.  It beats the crap out of paypal or credit card purchases in the convenience department.

[piramida]

This, #1, is a complete bullshit assertion. Investors do invest in the risky assets, all the time. No risk = no payout. BTC is just that, a very volatile risky investment which you can add to your portfolio in very smallish percentage. Investors which invest in government bonds only never will make any money.

#2, as pointed out, could not be further from truth, too. Yes it's shady while the currency stabilizes, but just look at what kind of businesses were built around the gold rush sites in CA, Australia, and so on. Every currency has it's infancy, and big legitimate businesses will never ever start accepting a new currency right away - only small shops and underground operations. It has to grow, and that is the only way it will. As for convenience, blah, there's nothing more convenient right now.

[AyeYo]

Just because merchants are accepting bitcoin doesn't mean people are going out and buying bitcoins to spend at said merchants.  And guess what those merchants are doing a soon as they receive bitcoins as payment for goods and services?

Bingo

[checkmate]

I would buy games, hardware, etc. with my Bitcoins if it was available in my country (Germany) - if there is a shop, I will buy my stuff with my BTC from there... no question.

But for now, keeping them or selling them is my only option - I do it for the fun anyways...

[Nagle]

Just because merchants are accepting bitcoin doesn't mean people are going out and buying bitcoins to spend at said merchants.  And guess what those merchants are doing a soon as they receive bitcoins as payment for goods and services?

Bingo

Any merchant who accepts Bitcoins needs to cash out really fast. We're seeing 25% changes in a day, and 10% changes in 10 minutes.  By the time a Bitcoin transaction is confirmed, it may have lost 10% of its value. You can't run a business on that.

[Cluster2k]

Just because merchants are accepting bitcoin doesn't mean people are going out and buying bitcoins to spend at said merchants.  And guess what those merchants are doing a soon as they receive bitcoins as payment for goods and services?

Bingo

Any merchant who accepts Bitcoins needs to cash out really fast. We're seeing 25% changes in a day, and 10% changes in 10 minutes.  By the time a Bitcoin transaction is confirmed, it may have lost 10% of its value. You can't run a business on that.

And the faster they convert to their nation's preferred currency, the faster bitcoin will fall in value.  Speculators and investors would see keen interest to sell as a signal that the price is going down.  They then wait for the price to fall.  Those people using bitcoin for real commerce are no doubt vastly outnumbered at the moment by miners and speculators willing to sell.

I'm watching bitcoin's price with interest as it falls through the $14 and $13 marks.  It's still going, at around $12.50 as I write this.  It may be partly related to the long weekend in the USA.  Bitcoin's price has historically fallen on weekends.  But something feels different this time.  Everyone expects the cycle to occur, and when it becomes common knowledge it's almost by definition not going to happen again for the same reasons.

[5grainsilver]

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. 

You've clearly never purchased anything using bitcoins.  It beats the crap out of paypal or credit card purchases in the convenience department.

Yes but it offers zero protection against scam sellers.  And paypal is super convenient for the buyer, just sucks for the seller.

[crunchiness]

https://i.imgur.com/oOsVu.png

That's a good point!

[AyeYo]

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. 

You've clearly never purchased anything using bitcoins.  It beats the crap out of paypal or credit card purchases in the convenience department.

Yes but it offers zero protection against scam sellers.  And paypal is super convenient for the buyer, just sucks for the seller.

That's another HUGE issue.  If I pay someone in Bitcoins, I have zero recourse once they're sent.  I can't even prove I sent the money to the seller because it's all anonymous.

[foggyb]

 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 investing as secure as your worst security practices. Just like good ol' dollars. If you don't protect your credit and bank cards, someone will clean out your account.

You're only half right about shady exchanges. Turns out its not that difficult to avoid being a MTGOX clone. CAVirtex is a new Canadian exchange that is fully government compliant, professionally run (by actual businessmen) and not shady in the least. The trade volume pegs CAVIRTEX at #4 among all exchanges.

Sorry for being such a buzzkill.

[dannickherpderp]

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. 

You've clearly never purchased anything using bitcoins.  It beats the crap out of paypal or credit card purchases in the convenience department.

Yes but it offers zero protection against scam sellers.  And paypal is super convenient for the buyer, just sucks for the seller.

That's another HUGE issue.  If I pay someone in Bitcoins cash, I have zero recourse once they're sent.  I can't even prove I sent the money to the seller because it's all anonymous.

[foggyb]

A. Don't send money to complete strangers.
B. Use services that protect your purchase.

WOW this is just like using dollars! Who knew! 

[AyeYo]

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. 

You've clearly never purchased anything using bitcoins.  It beats the crap out of paypal or credit card purchases in the convenience department.

Yes but it offers zero protection against scam sellers.  And paypal is super convenient for the buyer, just sucks for the seller.

That's another HUGE issue.  If I pay someone in Bitcoins cash, I have zero recourse once they're sent.  I can't even prove I sent the money to the seller because it's all anonymous.

The relevant difference being that if I'm paying in cash, they're placing the actual product in my hand.

[5grainsilver]

 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 investing as secure as your worst security practices. Just like good ol' dollars. If you don't protect your credit and bank cards, someone will clean out your account.

You're only half right about shady exchanges. Turns out its not that difficult to avoid being a MTGOX clone. CAVirtex is a new Canadian exchange that is fully government compliant, professionally run (by actual businessmen) and not shady in the least. The trade volume pegs CAVIRTEX at #4 among all exchanges.

Sorry for being such a buzzkill.

You are way off.

My bank account is insured by the Us government if my bank fails.

My bank reimburses me for fraud.

Heck I even get rebates for using my card to buy things.

If someone rips me off I can charge it back.

Bitcoin offers zero protection.  I keep some money in silver.  At least someone has to come to my house to steal it.  And I can still access it during a power outage. 

Bitcoin is a cool idea but has far too many flaws to be anything more than a cool payment method.

[piramida]

how is bitcoin different from silver? when you give your silver to someone, it's gone. no proof, no chargeback. just like bitcoin. your argument was?

[5grainsilver]

how is bitcoin different from silver? when you give your silver to someone, it's gone. no proof, no chargeback. just like bitcoin. your argument was?

Not really.  Silver can't be hacked or lost due to tech problems or power outages.  It has real world uses that guarantee it will always hold some value.  It doesn't depend on a computer for it to exist.

[dacoinminster]

Here's a cartoon showing what is going on:



Just replace "a stock" with "bitcoins".

[Ratman2050]

how is bitcoin different from silver? when you give your silver to someone, it's gone. no proof, no chargeback. just like bitcoin. your argument was?

Not really.  Silver can't be hacked or lost due to tech problems or power outages.  It has real world uses that guarantee it will always hold some value.  It doesn't depend on a computer for it to exist.

No one can predict the future with 100% certainty, but the probability of the internet disappearing is slim to none. In most developed countries power outages are rare. That's what laptops and phones are for. Not only that, but even if something like a hurricane took out an entire state, the rest of the world would be fine.

[kjj]

how is bitcoin different from silver? when you give your silver to someone, it's gone. no proof, no chargeback. just like bitcoin. your argument was?

Not really.  Silver can't be hacked or lost due to tech problems or power outages.  It has real world uses that guarantee it will always hold some value.  It doesn't depend on a computer for it to exist.

No one can predict the future with 100% certainty, but the probability of the internet disappearing is slim to none. In most developed countries power outages are rare. That's what laptops and phones are for. Not only that, but even if something like a hurricane took out an entire state, the rest of the world would be fine.

If you think that the internet might go away some day, make sure that you are spending more money on ammo than on silver.

[piramida]

And when the internet will be gone and the world will collapse into chaos, your precious silver bars would be worth next to nothing. As for stealing, hacking a computer or breaking into the house is about the same. Easier to protect from a hacking attempt, for me, than from a burglar - you can't unplug your house as you can your BTC wallet.

[cocodapuf]

how is bitcoin different from silver? when you give your silver to someone, it's gone. no proof, no chargeback. just like bitcoin. your argument was?

Not really.  Silver can't be hacked or lost due to tech problems or power outages.  It has real world uses that guarantee it will always hold some value.  It doesn't depend on a computer for it to exist.

Whoa, silver can't be hacked? If you were to keep your hard earned silver in your underwear drawer and then keep your back door unlocked, what's stopping someone from walking in and grabbing it.   Likewise, if you leave your wallet in your windows user folder, unencrypted, with your firewall down, what's stopping someone?

People, this is digital cash... only people with way too much money actually carry 5 grand in their wallet, put that stuff in the bank man.   For your own sake try to carry under $100 in your everyday wallet (digital or otherwise).  Unless you can get a 3rd party to secure your coin for you, managing a BTC savings account on your own is a lot like keeping a briefcase full of money; yes it certainly does carry with it serious security concerns.

[Nagle]

silver can't be hacked?

Oh? See Silver Thursday.

[foggyb]

My bank account is insured by the Us government if my bank fails.

My bank reimburses me for fraud.

Heck I even get rebates for using my card to buy things.

If someone rips me off I can charge it back.

What do all these services have in common?

You have to pay into the system (and pay dearly i might add) to have these privileges Its not a freebie.

[David M]

Any merchant who accepts Bitcoins needs to cash out really fast. We're seeing 25% changes in a day, and 10% changes in 10 minutes.  By the time a Bitcoin transaction is confirmed, it may have lost 10% of its value. You can't run a business on that.

Someone needs to learn about derivatives.

Example:

Shop A pays $US to suppliers with 30 day terms.
Shop A buys a Put expiring as close to the term as possible at the current market rate (X)
Shop A accepts Bitcoins.

Scenario 1:  Bitcoin rises in value. -> Shop A lets the Put expire or sells it.
Scenario 2:  Bitcoin falls in value. -> Shop A takes the Put to delivery and is guaranteed price X

The maximum cost to Shop A is the price of the Put regardless of price movement.

[Nagle]

Any merchant who accepts Bitcoins needs to cash out really fast. We're seeing 25% changes in a day, and 10% changes in 10 minutes.  By the time a Bitcoin transaction is confirmed, it may have lost 10% of its value. You can't run a business on that.

Someone needs to learn about derivatives.

Derivatives require a legal system that forces people to pay their debts and counter-parties strong enough to pay them.

[David M]

Derivatives require a legal system that forces people to pay their debts and counter-parties strong enough to pay them.

From the Bitoption FAQ

"Is this Escrowed trading? YES. You are guaranteed to be able to execute once you've purchased a contract."

That's good enough for me.

[molecular]

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.

This must be a misunderstanding, I'm not saying anything against bitcoin, and I never said it would fail.

Yes, miners sell coins.  What is your point?  How is this a mark against Bitcoins at all?

Of course miners sell coins, if they sell more, the price will fall: normal. Not a mark against bitcoin.

Oh no, gold miners sell gold!!!  Gold will fail!!

Honestly, what point are you trying to make?

My point was to object to your saying that (high) supply is not a problem (for the bitcoin exchange rate, I assumed), which I objected to, because high supply will lower the price. Maybe I misunderstood and you meant supply is not a problem (for bitcoin itself)? If so: I agree.

[molecular]

Any merchant who accepts Bitcoins needs to cash out really fast. We're seeing 25% changes in a day, and 10% changes in 10 minutes.  By the time a Bitcoin transaction is confirmed, it may have lost 10% of its value. You can't run a business on that.

Calculate with +3% lower rate, then, right after payment, automatically try to cash in the money at mtgox. If success: all is good, ship order, if unsuccessfull: tell user you can't sell at that price any more, offer new price or to abort order or return the BTC.

[molecular]

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. 

You've clearly never purchased anything using bitcoins.  It beats the crap out of paypal or credit card purchases in the convenience department.

Yes but it offers zero protection against scam sellers.  And paypal is super convenient for the buyer, just sucks for the seller.

That's another HUGE issue.  If I pay someone in Bitcoins, I have zero recourse once they're sent.  I can't even prove I sent the money to the seller because it's all anonymous.

If you can prove the merchant showed you a certain address, you can easily prove you sent money to that address by showing the transaction id.

The first part might be a problem, though, maybe a good merchant should sign a bill including the payment address so customers have proof?

[5grainsilver]

Derivatives require a legal system that forces people to pay their debts and counter-parties strong enough to pay them.

From the Bitoption FAQ

"Is this Escrowed trading? YES. You are guaranteed to be able to execute once you've purchased a contract."

That's good enough for me.

Umm...I was reading the bitoption status thread earlier and it sounds like the owner has stopped responding, people are owed money etc. 

A guarantee is only as good as the person making it.  And an escrow is only worthwhile if it is by a trusted and reliable third party. 

[AyeYo]

My bank account is insured by the Us government if my bank fails.

My bank reimburses me for fraud.

Heck I even get rebates for using my card to buy things.

If someone rips me off I can charge it back.

What do all these services have in common?

You have to pay into the system (and pay dearly i might add) to have these privileges Its not a freebie.

Doesn't cost me a cent to have those guarantees from the bank and CC companies.  It costs only a tiny fraction of my tax money to have the FDIC guarantee from the government, money I'll be paying no matter what anyway.

The protection are worth every penny, as people getting raped out of their Bitcoins by scammers and shady exchanges are finding out.

[Oldminer]

morning all,

I hope everyone's nice and relaxed and lubed up for today (in particular those of you with them shiny bitcoins still in your pockets...LOL)

[hugolp]

morning all,

I hope everyone's nice and relaxed and lubed up for today (in particular those of you with them shiny bitcoins still in your pockets...LOL)

Thank you. I have my lube in hand in case a girlfriend comes around. My bitcoins are well too. I dont care much about their price in dollars at this moment. But you boys have fun with the intraday.

[Cluster2k]

Any merchant who accepts Bitcoins needs to cash out really fast. We're seeing 25% changes in a day, and 10% changes in 10 minutes.  By the time a Bitcoin transaction is confirmed, it may have lost 10% of its value. You can't run a business on that.

Calculate with +3% lower rate, then, right after payment, automatically try to cash in the money at mtgox. If success: all is good, ship order, if unsuccessfull: tell user you can't sell at that price any more, offer new price or to abort order or return the BTC.

How is that easier than using a credit or debit card?  The merchant would have to wait up to an hour to have the bitcoin confirmed, and then maybe another hour to transfer it to MtGox.  If the price has moved down in those two hours, email the customer to demand more bitcoins.  If the customer refuses then wait another couple of hours for the bitcoins to be returned to the customer.  It's creating new problems while solving old ones.

[V4Vendettas]

I'm just seeing green did we just have a little rally ?

[5grainsilver]

Sucker rally on its way down.  Bitcoin will be less than $1 within 6 months.  The fundamentals will win in the end.

[V4Vendettas]

Sucker rally on its way down.  Bitcoin will be less than $1 within 6 months.  The fundamentals will win in the end.

We shall see we shall see.

Would rather it got to $1 soon as possible so I can buy in.
If everyone could keep on panic selling that would be grand and thanks in advance.

My gut tells me the sky isnt falling as fast as some seem to think.
My gut also told me once that I shouldnt have eaten a semi raw egg but only afterwards 

Who knows but it sure is fun to watch.

[Dubs420]

Awww what happened to your prediction? it broken

[Tronlet]

Yeah, I was worried there for a while, but I knew it couldn't really last. Going back up now.

[Jack of Diamonds]

Sucker rally on its way down.  Bitcoin will be less than $1 within 6 months.  The fundamentals will win in the end.

When you joined 2 weeks ago, you thought bitcoin was exciting. You tried to sell silver for bitcoins at over spot price but got no takers. Then you got bitter about being too late to the party, and went on a crusade against bitcoin,

Made a few predictions how it will fall to $10 within a week and how much it just sucks in general.

What gives? Do you lose out when someone else gets something? This seems like pure jealousy IMO.
You would kill to be an early miner or buyer, but you know that's not going to happen.

[5grainsilver]

Sucker rally on its way down.  Bitcoin will be less than $1 within 6 months.  The fundamentals will win in the end.

When you joined 2 weeks ago, you thought bitcoin was exciting. You tried to sell silver for bitcoins at over spot price but got no takers. Then you got bitter about being too late to the party, and went on a crusade against bitcoin,

Made a few predictions how it will fall to $10 within a week and how much it just sucks in general.

What gives? Do you lose out when someone else gets something? This seems like pure jealousy IMO.
You would kill to be an early miner or buyer, but you know that's not going to happen.

If you read my ad you will see that I wouldn't allow returns or escrow.  Those are not my normal terms and pretty clearly imply that I don't believe bitcoin will hold its value.  My opinion hasn't changed and I will still sell silver for bitcoins.

[Jack of Diamonds]

Why sell for bitcoin in the first place if you don't believe it's worth anything

Why bother putting it down at every opportunity because you weren't an early adapter

[5grainsilver]

I like the idea of a no fee sale a lot.  And I enjoy trading stocks and commodities, so find this market pretty interesting to discuss.  Is it against the rules here to have a negative outlook?  And no I am not jealous of those that have done well.  I like what I do and am not looking to get rich quick.

[grod]

How do you even quantify risk of holding bitcoin?  I mean, it's gotta be near infinite with all the question marks.  Which means any derivative, valued by some means involving Black-Scholes or similar would require the premiums to be gigantic enough to make the derivatives worthless. 

Oh, and the spreads would probably be monstrous too.

[CurbsideProphet]

I think the first thing we need to decide here is what is the argument.  Everyone's examples are all over the map.

Is Bitcoin a store of value?  Gold and silver are commodities NOT currencies.  Last I checked, I can't take any bullion down to McDonald's and buy a happy meal.  My understanding is Bitcoins are supposed to be a P2P currency, so lets move on.

Is Bitcoin a medium of exchange (ie. currency)?  This is where the big problem lies because the Bitcoin apologists will argue that merchants and buyers are adopting BTC's in daily transactions.  While this may be true in geekville, the fact is the majority of merchants do not recognize BTC's as a medium of exchange.  And in its present state, can you blame them?  We're seeing 20%+ swings in price at the moment.  Most businesses (as someone pointed out) run on very slim margins.  Do you honestly think some merchant scraping by to make a profit will be willing to take those types of risks?  Is BTC worth a $1?  $30?  Somewhere in between?  Who the hell knows, it's been priced at all those points over the short-term and that's the problem.

The only way a big merchant would be willing to put up with that type of volatility would be if there is a way to hedge.  The same way a business would hedge foreign currency exposure, interest rates, commodity prices, etc.  As far as I know, no such hedge for Bitcoin exists.  All we have are speculators moving the price around wildly. 

Bitcoin in its current state is a giant casino of monopoly money with speculators running prices up and down until someone is eventually left holding the bag.  If you want to argue that Bitcoin is a store of value, then fine, but in that case I would suggest you go out and buy gold or silver.  At least those have a few thousands years of history that show it can be a viable store of value.  But this horseshit fantasy that BTC's is a currency needs to end.  It's not and will never be without some substantial changes.

[Jack of Diamonds]

But this horseshit fantasy that BTC's is a currency needs to end.  It's not and will never be without some substantial changes.

Tell the admins to edit the front page then.

[CurbsideProphet]

But this horseshit fantasy that BTC's is a currency needs to end.  It's not and will never be without some substantial changes.

Tell the admins to edit the front page then.

Seashells can be a currency as long as someone like you and myself are willing to use them as exchange.  I know Bitcoin is touted as a currency, and is being used by more merchants yada yada yada...

I'm talking about a viable currency.  

[CurbsideProphet]

One thing they know for certain is the fees they will have to pay to MC/Visa if they take a payment that way, and are willing to try something, anything that can get them out from under that.

Let me get this straight, a merchant would be upset to pay a few hundred basis points to MC/Visa yet would have no problem with accepting a currency that can swing 20% or more in any particular direction.  You're going to sit there and tell me that your selling point to these merchants is, "Hey we can end those 3% transaction fees hitting your bottom line.  The tradeoff is that 99% of your overhead can't be paid with these Bitcoins, and oh yeah, next week it might be worth half what it is today."

And this is going to be widely adopted?

Sure it sounds like a reasonable argument, and it is one of the favorite tropes of Bitcoin critics... But before you go spouting it about like it is a known fact try to see what actual merchants have to say about accepting Bitcoin.

Send me a list of these actual merchants and I'll ask them myself.  Curious, any of these Fortune 500 companies?  How about publicly traded?  How about revenues of $1MM+ per annum?  Please tell me you're talking about bonafide merchants that can further Bitcoins cause and not Joe Neighbor selling video cards out of his basement.

[Jack of Diamonds]

Seashells can be a currency as long as someone like you and myself are willing to use them as exchange.  I know Bitcoin is touted as a currency, and is being used by more merchants yada yada yada...

I'm talking about a viable currency.  

Bitcoins came out 2 years ago.
Paper money has been around for about 2,000 years since imperial China and gold even longer.

I think the currency is doing pretty well considering it's barely even began circulation and usage.

[CurbsideProphet]

Seashells can be a currency as long as someone like you and myself are willing to use them as exchange.  I know Bitcoin is touted as a currency, and is being used by more merchants yada yada yada...

I'm talking about a viable currency.  

Bitcoins came out 2 years ago.
Paper money has been around for about 2,000 years since imperial China and gold even longer.

I think the currency is doing pretty well considering it's barely even began circulation and usage.

For argument's sake, lets say I agree with you.  The currency has done well considering it's infancy (I actually have no issue with this).  What I'm trying to say is what propels BTC from an experiment to a viable medium of exchange.

People inherently dislike change.  It would take a rather monumental benefit for a mass of people to adopt something new.  It's not going to be merchant fees.  

Could it be a decentralized, deflationary currency that can move globally quickly and efficiently?  I can see that as the potential propellant.  If I didn't see some potential in Bitcoin, I wouldn't be here.  My point is even though BTC is in its infancy, there are some big flaws that need to be addressed.  You cannot have a medium of exchange without confidence.  You cannot have confidence without transparency and stability.  BTC may have transparency but it most certainly does not have stability.    

[CurbsideProphet]

Oh please...

Lift a finger why don't you: https://en.bitcoin.it/wiki/Trade

Seen the list.  A bunch of start-up nobodies.  If I showed that list to some person walking down the street they wouldn't be able to recognize 1% of those names. 

[kjj]

People inherently dislike change.  It would take a rather monumental benefit for a mass of people to adopt something new.  It's not going to be merchant fees.  

Could it be a decentralized, deflationary currency that can move globally quickly and efficiently?  I can see that as the potential propellant.  If I didn't see some potential in Bitcoin, I wouldn't be here.  My point is even though BTC is in its infancy, there are some big flaws that need to be addressed.  You cannot have a medium of exchange without confidence.  You cannot have confidence without transparency and stability.  BTC may have transparency but it most certainly does not have stability.    

Do you have a proposal?

The markets will naturally stabilize as they grow and mature.  I don't really see any way to force it.

[CurbsideProphet]

Do you have a proposal?

Working on it.  I can still put too many holes through it but I'll post for criticism once I can clean it up.

The markets will naturally stabilize as they grow and mature.  I don't really see any way to force it.

You might be right.  Although natural stabilization may mean a dramatic drop in price.  I wonder what % of the community would bail at that point.

[5grainsilver]

I made some mistaks in my analysis of bitcoin.  I was looking at it like a stock, but the difference is that my method of analysis is designed to track and piggyback on institutional order flow.  There is no institutional order flow in bitcoin.  Stupid mistake! 

Bitcoin is now behaving just like you would expect if you think about it.  The market is comprised of speculators and miners.  The miners regularly sell, and the speculators can only speculate to the long side.  That leads to the occassional speculative spike, followed by profit taking and selling off by the miners.  This is creating a pattern of the market stepping down price levels in an orderly manner as miners lower their standard of what they are willing to sell for.  This will continue to happen until we reach <$1.00.  If shorting was possible we would already be there IMO.  Of course it could blow up at any time if we get some more dumb money coming in from a media story or something.  And then it will crash again.  I think bitcoin has already seen its all time high though, and will go down soon as a unique piece of internet history.   

[Rassah]

The market is comprised of speculators and miners.  The miners regularly sell, and the speculators can only speculate to the long side.  That leads to the occassional speculative spike, followed by profit taking and selling off by the miners.  This is creating a pattern of the market stepping down price levels in an orderly manner as miners lower their standard of what they are willing to sell for.  This will continue to happen until we reach <$1.00.  If shorting was possible we would already be there IMO.  Of course it could blow up at any time if we get some more dumb money coming in from a media story or something.  And then it will crash again.  I think bitcoin has already seen its all time high though, and will go down soon as a unique piece of internet history.   

Perhaps. Or perhaps doing things like designing working/secure phone apps, shop POS systems, ATMs, competent and easy exchanges, and easy-to-use secure wallet software just takes a bit more time.

[niemivh]

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.

Welcome to deflationary economics 101.

 

A system in which he who can afford to sit the longest on their pile of money wins.  A system that resembles a bunch of hens sitting on eggs rather than the exchange of goods and services and economic growth through production and investment.  A system in which if a person was able to take a time machine into the future they would have become richer simply through the 'virtue of saving'.

[grue]

A system in which he who can afford to sit the longest on their pile of money wins.  A system that resembles a bunch of hens sitting on eggs rather than the exchange of goods and services and economic growth through production and investment.  A system in which if a person was able to take a time machine into the future they would have become richer simply through the 'virtue of saving'.

better than inflationary currency, where everyone is buying mass produced electronics every year, and in the process, racking up a ton of debt

[Nagle]

Here's the last 30 days on Tradehill.  (I'm using Tradehill because various screwups at Mt. Gox have messed up their data for the last month. Tradehill and Mt. Gox never stay far apart for long.)

Bitcoins seem to be leveling out in the $14-$15 range, and there's a modest downward trend. "Rallies" and "crashes" are just noise. The days of high volatility around June 18-22 reflect Mt. Gox's troubles. The rest of the time, volatility is usually within +- $0.50/day.

There's less going on than looking at short-term market data suggests.

[Oldminer]

Agreed.

http://www.youtube.com/user/BitcoinChannel#p/u/9/aWxbXGQ3Ezk

http://www.youtube.com/watch?v=oJ_Ndua0-n4

[5grainsilver]

Yeah but if you are going to use daily charts you need to use mtgox, because tradehill data only goes back like 30 days.  If you see the full picture on the long term chart, you see a parabolic run up from zero to 30, followed by a blowoff top, a triangle breakdown, and a pause with a downward drift we are in right now before the next leg which will probably be down to sub 10. 



Uploaded with ImageShack.us

[istar]

Yeah but if you are going to use daily charts you need to use mtgox, because tradehill data only goes back like 30 days.  If you see the full picture on the long term chart, you see a parabolic run up from zero to 30, followed by a blowoff top, a triangle breakdown, and a pause with a downward drift we are in right now before the next leg which will probably be down to sub 10. 



Uploaded with ImageShack.us

I think you could be right if I remember correctly what I read somewhere, that miners can sell for $3 and still make a profit. If that is right, it means the price will go down to just around $3

Another huge problem is early miners sitting at huge amounts of bitcoins which they can also sell for $3 and still make a profit.

In the long term 2-3 years when miners cannot sell to cheap and early adopters have sold, price will increase. But right now its slowly going to go down the coming months. Unless...Unless there are lots of new investors, which is not impossible considering it has just started to appear in china. However if the markets go down, it will attract less investors.

[n4l3hp]

Your electricity must be free or really cheap if you can profit at $3 per coin. At $0.21 per kw in my area, $7.00 per coin is needed so that I can at least pay the electric bill. The fees for the funds transfer and exchanges is not even included.

[5grainsilver]

Price will depend on demand, not cost of electricity.  If bitcoins could be converted back to energy that argument would make sense, but it can't.  Difficulty will respond to price.  We have already seen that happen on the way up.

[conspirosphere.tk]

Yes: price depends on demand and difficulty depends on price, but also:
demand depends on price: if the price manage to increase for a while, or at least stops dropping, you may expect more investment/speculative demand -and even the opposite applies.

Expectations on future price play a special role on miners (and even power bills who will arrive in the next future): many may continue to mine for a while for insignificant profits, hoping for better times by further increases of the BTC price, but after a while if nothing changes many miners (me included) will go looking for s.t. better to do with their hardware, electricity and time when they lose any hope for better returns.

[muyoso]

Perhaps. Or perhaps doing things like designing working/secure phone apps, shop POS systems, ATMs, competent and easy exchanges, and easy-to-use secure wallet software just takes a bit more time.

You can't be serious.  I swear 50% of the people involved with bitcoins are completely delusional.  Who is investing in ATM's and POS systems?  Do you know how expensive those are to implement?  The totality of bitcoins are worth under a hundred million USD right now.  In 2005, Visa and Mastercard alone did 100 million USD of volume for customers in around 23.87 minutes.

Who the hell is investing in ATM's and POS systems for bitcoin.  Come on, you guys are smarter than this.   

[niemivh]

A system in which he who can afford to sit the longest on their pile of money wins.  A system that resembles a bunch of hens sitting on eggs rather than the exchange of goods and services and economic growth through production and investment.  A system in which if a person was able to take a time machine into the future they would have become richer simply through the 'virtue of saving'.

better than inflationary currency, where everyone is buying mass produced electronics every year, and in the process, racking up a ton of debt

Isn't there a relative means of balancing these two opposing forces in the economic system?  Moreover, why in our 'inflationary system', that i assume you are alluding to, does the inflation occur?  What is the cause of it in your opinion?

[BitcoinBug]

Who the hell is investing in ATM's and POS systems for bitcoin.  Come on, you guys are smarter than this.   

http://biticon.wordpress.com/2011/03/31/bitcoin-atm/

It is just a hobby project for now though. But as much as I can see, there are lots of highly technical people with high beliefs in Bitcoin and also lots of money pouring into Bitcoin on stock exchanges, so why does the possibility of investing into POS seem so off to you? If Bitcoin is the future, POS will be part of that. Probably not in a month and possibly not in a year, but later, SURE!

[Jack of Diamonds]

You can't be serious.  I swear 50% of the people involved with bitcoins are completely delusional.  Who is investing in ATM's and POS systems?  Do you know how expensive those are to implement?  The totality of bitcoins are worth under a hundred million USD right now.  In 2005, Visa and Mastercard alone did 100 million USD of volume for customers in around 23.87 minutes.

Who the hell is investing in ATM's and POS systems for bitcoin.  Come on, you guys are smarter than this.  

You're right on this one. Ultra-libertarians and Ron Paul supporters/homeless people who know little of how financial markets work could actually tarnish bitcoins reputation with these claims.

'We' aren't anywhere near the level of Bitcoin ATMs. Point of sales devices, definitely, like klemen091 mentioned above.

This currency (or commodity) is only 2 years old. Talking about bitcoin withdrawals from public places is like mentioning a Pluto expedition for space travel, it's not going to happen for a very long time under current circumstances.

I like Bitbills as the most convenient tool to date. Not too expensive to produce, relatively easy to redeem.

http://www.bitbills.com/

[jtimon]

Sorry, I haven't read the whole thread but, shouldn't it be in the speculation board?

[Rassah]

Perhaps. Or perhaps doing things like designing working/secure phone apps, shop POS systems, ATMs, competent and easy exchanges, and easy-to-use secure wallet software just takes a bit more time.

You can't be serious.  I swear 50% of the people involved with bitcoins are completely delusional.  Who is investing in ATM's and POS systems?  Do you know how expensive those are to implement?  The totality of bitcoins are worth under a hundred million USD right now.  In 2005, Visa and Mastercard alone did 100 million USD of volume for customers in around 23.87 minutes.

Who the hell is investing in ATM's and POS systems for bitcoin.  Come on, you guys are smarter than this.   

Pretty much anyone who sees the potential of Bitcoin transacting and has money to invest should be investing. The first person to come up with a well designed POS system will likely capture the first mover and networking advantages, dominate the market, and make millions. Your question is like asking, "who the hell is investing in exchange services" about 6 months ago. Sure, it would've seemed like a stupid money-losing investment then, but look at Mtgox activity and profits today.

[grod]

"Who the hell is investing in GPU mining hardware in 2010?  It's a losing proposition, you'll never make back the price of those 5870s"

Hindsight is 20/20.  The people making the same arguments against early adopter GPU miners would likely give their left nut for a time machine to summer of 2010.

[jtimon]

Sorry, I haven't read the whole thread but, shouldn't it be in the speculation board?

I don't think there was a 'speculation' board when this thread was started.

"RALLY !!" Wasn't created there neither.

[5grainsilver]

Investing in ATMs etc would be pretty risky considering governments will shut bitcoin down if it starts looking too much like a real currency.  Look at what they did to egold.

[muyoso]

Pretty much anyone who sees the potential of Bitcoin transacting and has money to invest should be investing. The first person to come up with a well designed POS system will likely capture the first mover and networking advantages, dominate the market, and make millions. Your question is like asking, "who the hell is investing in exchange services" about 6 months ago. Sure, it would've seemed like a stupid money-losing investment then, but look at Mtgox activity and profits today.

No, my question is not like asking that.  Exchange services serve a purpose that had to exist.  POS systems and ATM's do not need to exist.  The need for them to exist will come AFTER bitcoin becomes a stable and very widely used currency.  All POS systems and ATM's would serve now is an extra useless layer between turning your real money into purchased goods.  Take your real money, put it in the ATM, get out your wacky crazy bitcoin money, go to store, pay with wacky crazy bitcoin money, which the teller has to then turn instantly back into real money.  Its like a giftcard with none of the advantages for the seller.

[5grainsilver]

Investing in ATMs etc would be pretty risky considering governments will shut bitcoin down if it starts looking too much like a real currency.  Look at what they did to egold.

That is kind of like saying "Look what they did to Napster".

Not the same.

The more likely comparison is "Look what they did to BitTorrent".

ATMs and pos aren't exactly peer to peer.

[Rassah]

Pretty much anyone who sees the potential of Bitcoin transacting and has money to invest should be investing. The first person to come up with a well designed POS system will likely capture the first mover and networking advantages, dominate the market, and make millions. Your question is like asking, "who the hell is investing in exchange services" about 6 months ago. Sure, it would've seemed like a stupid money-losing investment then, but look at Mtgox activity and profits today.

No, my question is not like asking that.  Exchange services serve a purpose that had to exist.  POS systems and ATM's do not need to exist.  The need for them to exist will come AFTER bitcoin becomes a stable and very widely used currency.  All POS systems and ATM's would serve now is an extra useless layer between turning your real money into purchased goods.  Take your real money, put it in the ATM, get out your wacky crazy bitcoin money, go to store, pay with wacky crazy bitcoin money, which the teller has to then turn instantly back into real money.  Its like a giftcard with none of the advantages for the seller.

You're getting it backwards. It's not "using real money to get bitcoin," it's using bitcoin to get real money or real goods/services. ATMs will allow you to pull your bitcoin savings out in "real money" cash form, so you can use your bitcoin with fiat-based retailers. As for the POS (point of sale) systems, we need those to have a "widely used currency." They're the systems that you would approach with your bitcoin wallet and pay the retailer in bitcoin. It'll be up to the seller whether to hold the money in bitcoin form or convert, but POS is needed to at least be able to PAY in bitcoin.

[5grainsilver]

Well now I am starting to wonder how long it can maintain this orderly gradual drop.  What do you guys think is the panic point that will start a faster selloff and complete the penny stock pattern?

[Cluster2k]

Well now I am starting to wonder how long it can maintain this orderly gradual drop.  What do you guys think is the panic point that will start a faster selloff and complete the penny stock pattern?

There are no doubt many miners out there who bought equipment specifically for mining.  If their investments have not been paid off yet they may approach the "ah, stuff it!' point where they see the recouping of their costs drifting further into the distance while their hardware depreciates in value.  If enough cut their losses and run (sell up and dump BTCs) we may see a significant drop as I doubt there are enough cashed up investors on the other side to buy up all the coins.  Even the most ardent bitcoin booster must wonder whether if it's worth buying bitcoins today at US$12.85 when they could be US$11 tomorrow.

I sold a bunch of coins around US$18 to pay costs.  Looks like a pretty good decision at the moment.  BTC's value has been in a steady decline for almost a month.  It's not immune to the general shenanigans happening at the moment in the USA and PIIGS. 

[evoorhees]

Even the most ardent bitcoin booster must wonder whether if it's worth buying bitcoins today at US$12.85 when they could be US$11 tomorrow.

The shortsightedness of some of these comments amazes me. Bitcoin is either worth pennies as a silly tech-geek collectors item, or worth thousands of dollars a piece as the new currency of the internet and international trade. There is not much middle ground, and the true value will be realized over the next 6-24 months.

Trying to ponder whether to sell at $12.85, or $11, or $13.46... so silly! 

[evoorhees]

Welcome to deflationary economics 101.

That's why none of us buy computer equipment. We all know we'll get twice the power at half the price in 6 months. I'm still on an Apple II and one of those old Nokia cell phones from 1998. Clearly, deflation ruins economic progress.

PS- Bitcoin is not deflationary, regardless. It's asymptotically inflationary. It's only deflationary if people lose/misplace wallet files faster than the new currency is minted. In fact, BTC is much more inflationary that USD right now.

[netrin]

Bitcoin is not deflationary, regardless. It's asymptotically inflationary. It's only deflationary if people lose/misplace wallet files faster than the new currency is minted. In fact, BTC is much more inflationary that USD right now.

Bitcoins has seen 100%, 50%, and now 30% annual monetary inflation. Dollars have seen 300% M0 monetary inflation with the quantitative easing in 2008-2009. Currently this month, bitcoins are price inflating (currency devaluation) rapidly against the dollar (10% for the past week), but over the years, bitcoin has deflated 80% monthly against the dollar on average (doubled every ~50 days).

[evoorhees]

Bitcoins has seen 100%, 50%, and now 30% annual monetary inflation. Dollars have seen 300% M0 monetary inflation with the quantitative easing in 2008-2009. Currently this month, bitcoins are price inflating (currency devaluation) rapidly against the dollar (10% for the past week), but over the years, bitcoin has deflated 80% monthly against the dollar on average (doubled every ~50 days).

Bitcoin has never deflated - it is always inflating at a diminishing rate. Its price has fallen. Price changes =/= inflation or deflation.  Don't confuse a symptom of inflation (rising prices) with inflation itself (increase in the money supply).

Bernanke does this all the time and it drives me crazy. He says, "the rising costs of food and energy are driving inflation higher." Nonsense. HE is driving inflation higher, and as a result food and energy costs are rising. It's like 1984 word-isms. War is peace. Freedom is slavery. Debt is stimulus

[netrin]

Bitcoins has seen 100%, 50%, and now 30% annual monetary inflation. Dollars have seen 300% M0 monetary inflation with the quantitative easing in 2008-2009. Currently this month, bitcoins are price inflating (currency devaluation) rapidly against the dollar (10% for the past week), but over the years, bitcoin has deflated 80% monthly against the dollar on average (doubled every ~50 days).

Bitcoin has never deflated - it is always inflating at a diminishing rate. Its price has fallen. Price changes =/= inflation or deflation.  Don't confuse a symptom of inflation (rising prices) with inflation itself (increase in the money supply).

Bernanke does this all the time and it drives me crazy. He says, "the rising costs of food and energy are driving inflation higher." Nonsense. HE is driving inflation higher, and as a result food and energy costs are rising. It's like 1984 word-isms. War is peace. Freedom is slavery. Debt is stimulus

I am careful to distinguish between 'monetary xflation' and 'price xflation'. I have not confused terms; You have. I'm sure you've read a lot of Austrian, but perhaps you should familiarize yourself with the mainstream (aka the century in which you live), if only to know thy enemy, if you will:

On the Origin and Evolution of the Word Inflation
by Michael F. Bryan
http://www.clevelandfed.org/research/commentary/1997/1015.pdf

[evoorhees]

I am careful to distinguish between 'monetary xflation' and 'price xflation'. I have not confused terms; You have. I'm sure you've read a lot of Austrian, but perhaps you should familiarize yourself with the mainstream (aka the century in which you live), if only to know thy enemy, if you will:

Yes, the mainstream economists misuse the term. Given that they were unable to predict the largest economic disaster since the Great Depression, I tend not to lend credence to their opinions and misguided definitions. Not to mention the manipulation of this terminology is insidious, it has confused the entire world as to the reasons for the increasing price of milk. It has gotten to a point where people believe "inflation" is just a natural phenomenon in a market economy, instead of an intentional and deliberate policy by the central bank.

The discrepancy in definitions is not an innocent evolution of language, it is an intentional perversion of meaning which obscures an extremely important phenomenon. I refuse to mislead other people and follow suit by adopting and perpetuating molested vernacular.

[netrin]

I am careful to distinguish between 'monetary xflation' and 'price xflation'. I have not confused terms; You have. I'm sure you've read a lot of Austrian, but perhaps you should familiarize yourself with the mainstream (aka the century in which you live), if only to know thy enemy, if you will:

Yes, the mainstream economists misuse the term. Given that they were unable to predict the largest economic disaster since the Great Depression, I tend not to lend credence to their opinions and misguided definitions. Not to mention the manipulation of this terminology is insidious, it has confused the entire world as to the reasons for the increasing price of milk. It has gotten to a point where people believe "inflation" is just a natural phenomenon in a market economy, instead of an intentional and deliberate policy by the central bank.

Like it or not, fractional reserve banking exists and must be described. The Fed created M0 inflation to counter M1, M2 deflation. Bad money deflates, people default or pay off principal, contracting the debt based money supply. Many of those same people/institutions who once had debt now have newly printed dollars. Is that inflation or deflation?

The more 'real' (food, energy, metal, M0) inflated massively in the last three years. The less 'real' (M2, M3, deposits) deflated.

The discrepancy in definitions is not an innocent evolution of language, it is an intentional perversion of meaning which obscures an extremely important phenomenon. I refuse to mislead other people and follow suit by adopting and perpetuating molested vernacular.

Please read the article I personally retrieved for you. It's short.

There's certainly been a perversion of the language to a point, but you have to be realistic. The vast majority are confused by archaic usage. Even those 'in the know' can not be expected 'to know' without context unless you preach to the choir. Perhaps you can use the monetary- and price- terms as I have, which would have been just as well understood in Jefferson's day as today.

I have a pet peeve against the loose usage of 'irony' - the contradiction of the context - not just contradiction nor unfortunate circumstances. Or the use of 'tea' to refer to any herbal infusion. The use of 'liberal' to mean economic conservative and 'conservative' to mean liberal. But what's the point? Whether by manipulation, improvement, or laziness, language changes.

[Tronlet]

I fight a loosing battle against the loose usage of 'irony'

Oh, the irony.

[netrin]

I fight a loosing battle against the loose usage of 'irony'

Oh, the irony.

STREPSIADES: No Zeus? Then who makes it rain? Answer me that.

SOCRATES: Why, the Clouds, of course. What’s more, the proof is incontrovertible. For instance, have you ever yet seen rain when you didn’t see a cloud? But if your hypothesis were correct, Zeus could drizzle from an empty sky while the clouds were on vacation.

STREPSIADES: By Apollo, you’re right. A pretty proof. And to think I always used to believe the rain was just Zeus pissing through a sieve.

[5grainsilver]

Just had to bump this lol.  Looks like the fundamentals are winning out now that the dumb money from the media exposure has dried up.  Classic bubble/pumpndump. 

[Rassah]

Just had to bump this lol.  Looks like the fundamentals are winning out now that the dumb money from the media exposure has dried up.  Classic bubble/pumpndump. 

Can you list the numerical aspects of the fundamentals, and the corresponding price?

[5grainsilver]

Well, with no reason to use them instead of regular fiat, and real risk of government intervention making them worthless, and a continuing supply coming on the market daily, I would guess under 10 cents.  That worth comes from the very small chance this will take off.  A low probability, huge payoff bet.     

Imho of course, and I could be dead wrong.  So diversify.  I personally would start watching charts for a buy point under 1.00, just to see if it sets up.  I might buy some around 10 cents regardless of charts.

[Rassah]

Well, with no reason to use them instead of regular fiat, and real risk of government intervention making them worthless, and a continuing supply coming on the market daily, I would guess under 10 cents.  That worth comes from the very small chance this will take off.  A low probability, huge payoff bet.     

Imho of course, and I could be dead wrong.  So diversify.  I personally would start watching charts for a buy point under 1.00, just to see if it sets up.  I might buy some around 10 cents regardless of charts.

So, entirely guess-based then...

[Drifter]

Well, with no reason to use them instead of regular fiat, and real risk of government intervention making them worthless, and a continuing supply coming on the market daily, I would guess under 10 cents.  That worth comes from the very small chance this will take off.  A low probability, huge payoff bet.    

Imho of course, and I could be dead wrong.  So diversify.  I personally would start watching charts for a buy point under 1.00, just to see if it sets up.  I might buy some around 10 cents regardless of charts.

You have to be kidding yourself if you think the price will drop to 10 cents. Anyone who sold a decent amount between $10-30 would happily buy thousands of coins at $1 or $2. If I sold 1000 coins at $25 and prices fell to $1, I would want to buy those 1000 coins back, plus more and still have a large profit. Especially considering there is nothing wrong with bitcoin, it just hasn't taken off as fast or in the way some have envisioned.

Obviously a guess, but anyone who made a good amount of money in the double digit range would have to be an idiot not to invest some, say 1/10th, back in once they think it has hit a low point. The chance to gain that income twofold would outweigh the risk of losing a small amount of your income at those low costs. That alone would keep us above the very low digits.  

[Stuffe]

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.       

I agree, the supply side is running wild.
This is why I suggested making it a factor of transactions (read https://bitcointalk.org/index.php?topic=26380.0)

[JCbit]

this isn't helping our cause; how many wallet holders are you influencing to sell  with this topic name.
at least you should have posted this in speculation

[netrin]

I was happy to pick up some coins again at $6, but in the same day I sent a donation, in which I still calculate as though the price is $30. I don't consider myself a hoarder, I just think they are temporarily 80% devalued. At the end of every trading day, I try to close in bitcoins, not dollars. I can move my bitcoins effortlessly. That's amazing!

[molecular]

I agree, the supply side is running wild.
This is why I suggested making it a factor of transactions (read https://bitcointalk.org/index.php?topic=26380.0)

I have to agree with the 3rd post on the referenced thread: https://bitcointalk.org/index.php?topic=26380.msg330368#msg330368

Making generation rate dependent on transaction volume? That idea is truly horrible.

[walidzohair]

Why bitcoins are dropping, and will continue to do so?


So you askin me why btc prices will keep diving deep in blue sea ?


Well I tell ya ...


1) Lots of (Poor-mid class to poor - wealth dreamers) are jumping into (mining-mining gear-mining contracts-mining shit , .. etc) with huge investments dreaming of creating wealth out of thin air.



2) Very low number of (speculators-long term investors - normal people saving money - daily btc buy from a shop users) are buying in! and this is really strange since everything else is turning out to be obsolete investment with over priced current prices or nu future or whatever. I really wounder where are the normal people and the real investors hiding their reserve cash since it is a global decline and yet no specific single market/stock is chosen to be the last resort yet!



3) Very Very Very low business (that offers real services/goods for BTC only or with slight advantage for using btc - like discounts maybe) entering the market.








So,.............








Simply we have the 'ld good market rule  (Supply and Demand)


AAAAAAAAAAAAAA+ Lot of Supply (dreaming Miners)


and


tiny steady demand            <<<<<   "Tiny Steady demand"


and


Swinging Speculator  demand-supply-demand-Supply to make money out of idiots.



SO the final sum will be a lot of supply and almsot no demand >>>>>



BTC prices = 000.0000000000000000000000000001 USD

[Drifter]

[Rassah]

Simply we have the 'ld good market rule  (Supply and Demand)


AAAAAAAAAAAAAA+ Lot of Supply (dreaming Miners)


and


tiny steady demand            <<<<<   "Tiny Steady demand"

Wow that was some formatting. Only objection I have to your assertion is the claim that lots and lots of new miners = more and more supply. Supply stays the same, producing only 50BTC every 10 minutes. Only thing lots and lots of new miners adds is lots and lots of new people, however poor, who are also interested in/have demand for bitcoin  

[kjj]

Well done.

[Tronlet]

Hello people!

I could be saying important things!

I could be saying utterly useless things, or perhaps invalid points!

Either way, no one will care because my post is too difficult to bother to read!