The motivations to purchase bitcoin

[johnyj]

As discussed before, money's value is not directly affected by supply and demand, it is mostly a consensus established among people. Even many merchants accept bitcoin payment, its exchange value may still stay low for some time, because people don't have a constant motivation to purchase bitcoin (why exchange to another currency and pay when you can pay directly with a local currency? Lower transaction fee is not a good reason, especially the consumer seldom pay for it)

So the value of bitcoin will be lying around the mining cost, where mining is the lowest possible cost to acquire bitcoin, and miners are those who are willing to put risk capitcal into bitcoin. This is a consensus that many people would agree upon


For average person, I can think of the following main motivations to purchase bitcoin:

1. To benefit from its price appreciation

2. To transfer capital worldwide

3. To store value in it to hedge the inflation risk


No.1 is just speculation, it will not affect the long term performance of bitcoin, when the exchange price do not rise, speculators will cash out and cause the price to fall

No.2 also will not affect bitcoin value, when the transfer is done, bitcoins will be converted back to fiat at another location

No.3 could be the most fundamental support for bitcoin long term wise. People believe in supply and demand curve, especially those graduated from economy schools where marginal utility is their bible. Given such a belief, they will forecast that bitcoin's exchange value will rise constantly due to its limited supply and ever-increasing demand (there is no upper limit for how much you can save)

If more people are educated and believe in such forecast, they will buy bitcoin, their buying action will push the price higher, further strengthen their belief

There are also some other motivations like tax evasion, buying drugs, hedge the risk of money being confiscated in a bank, or preparing for a total collapse of fiat money system. These are not very popular and might not be supported by government

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[p2pbucks]

I agree , but now the problem is many ppl dont get what btc is . Btc is really hard for them to understand .
prikey & pubkey concepts like a conundrum to them
BTC price would pump to 1000USD If more ppl really understand btc

[heiska]

To understand the motivations to purchase bitcoins, I would simply take a look at where people spend theit bitcoins. Which bitcoin-only businesses are currently booming?

1. The gambling industry
2. The drug marketplaces

This probably changes in the future when bitcoins start replacing Paypal. However, currently those are the two industries driving bitcoin adoption.

[alp]

To understand the motivations to purchase bitcoins, I would simply take a look at where people spend theit bitcoins. Which bitcoin-only businesses are currently booming?

1. The gambling industry
2. The drug marketplaces

This probably changes in the future when bitcoins start replacing Paypal. However, currently those are the two industries driving bitcoin adoption.

Pretty good take on things.  A lot of the gambling, however, comes from bored speculators IMO.  I don't know of many people buying Bitcoins to play Satoshi dice, but plenty of hoarders will play since there is nothing better to do.  This isn't to say there isn't some gambling going on where people are acquiring to gamble.

You'll notice the areas where Bitcoin thrives is where it can vastly outperform the other options.  Things like online retail just aren't that useful compared to the options.  A lot of people complain about the credit card fees that exist, but that gives you a lot of protection as a consumer and the cost of acquiring Bitcoins quickly makes it not useful for the non-Bitcoin hoarder.

For Bitcoin to succeed, it will first be in places where it vastly is superior.  Drugs and gambling it currently is vastly superior.  I'm surprised we haven't seen more on the porn side as well.  Once you have more widespread usage in these areas, expect the cost of acquiring Bitcoins to drop, thus making general economic activity more common.  It's a bit of a chicken and egg problem - you don't really use Bitcoin as a currency if there is nowhere to spend it, and you don't accept it because not many people are spending it with you.  If it starts becoming more widespread (say 10% of people use it for something, even if its just some niche use), then they will be much more willing to accept it.  Then small edges become more useful (sending money with Bitcoin to a friend would be easier than PayPal, etc..., but not if your friend has to go through an exchange to spend it or find some small site to spend it).

Find areas where people cannot buy things with traditional means (gambling, drugs of course, but what else?), and that's where you'll see it take off.

[Dps23]

Cryproenviroment and bitcoin needs as much as possible honest and serious people who are searching for some value deposit instead of gold.
Unfortunately everybody sees just the 1% of drug dealers and similar users what could shed some shadow over btc but hopefully in long term it will change to good.

[halfawake]

I'll freely admit my motivation for buying bitcoins was reason #1.  Even at ~$100, it still has a lot of room to appreciate if it catches on.  But I also use it as an investment since I am investing my bitcoins rather than just leaving them in cold storage.

[Zaih]

Inflation in Bitcoin at the moment is crazy though? It'll be at least another few years until Bitcoin has a substantial edge over other currencies as far as supply side inflation goes.

[johnyj]

Inflation in Bitcoin at the moment is crazy though? It'll be at least another few years until Bitcoin has a substantial edge over other currencies as far as supply side inflation goes.

The supply side is 3600 coins per day, a market value of 360K USD. Comparing that with FED's QE3, which is currently at 2.8 billion USD per day, that is nothing

[DeathAndTaxes]

Inflation in Bitcoin at the moment is crazy though? It'll be at least another few years until Bitcoin has a substantial edge over other currencies as far as supply side inflation goes.

The supply side is 3600 coins per day, a market value of 360K USD. Comparing that with FED's QE3, which is currently at 2.8 billion USD per day, that is nothing

Nominal numbers are meaningless and arbitrary.

Bitcoin's money supply is still growing at >10% on an annualized basis.  That is high monetary inflation in any economic book.  The fact that Bitcoin maintains purchasing power is a pretty solid testament to the demand but monetary inflation is still high.   

[Dps23]

The supply side is 3600 coins per day, a market value of 360K USD. Comparing that with FED's QE3, which is currently at 2.8 billion USD per day, that is nothing

Yes I think so. Many bitcoin must be sold immediately. If people didnot sell them and hold them price would be much higher.
I suppose that people who are mining with asics sell some coins all the time to get their investment back but once they earn some money back they would stash all mined coins and price can reach at least $200. and once it starts soaring it could go very high because all people would be holding coins at the moment but simultaneously many new investors would like to buy some bitcoin. It could end on $1000 who knows. And if price would stay at this level for some time it could influence much all future expectations.....

[johnyj]

Recently I put some order at localbitcoins.com to purchase and sell bitcoins, to my surprise, there are many people buying bitcoins from me, but I have not received any sell orders, so I have to actively buy coins from other exchanges

So it seems that most of the people do not want to sell their coins, or they just don't have enough coins to sell. The statement that most of the coins mined will be sold immediately at market price is not true. The current sell presure mostly comes from early investors


This chart shows how 10%, 20% and 50% cash out strategy by investors will affect the bitcoin daily supply. If the mined coins were mostly hoarded (acquired through investing in mining devices), then the daily coin supply on exchanges will mostly consists of coins cashed out from early investors, this will reduce the amount of supply on market and increase the exchange rate

Mining is a cheap way to acquire coins, since it does not affect the market price. Only when mining becomes unprofitable, people will start to purchase coins on exchanges. So before the difficulty rise another 10 fold, we might not see a lot of buying support on exchanges, that is another 6 months

[Dorrace]

I'll freely admit my motivation for buying bitcoins was reason #1.  Even at ~$100, it still has a lot of room to appreciate if it catches on.  But I also use it as an investment since I am investing my bitcoins rather than just leaving them in cold storage.

 hwere do you ınvest your bıtcoıns ??

[halfawake]

I'll freely admit my motivation for buying bitcoins was reason #1.  Even at ~$100, it still has a lot of room to appreciate if it catches on.  But I also use it as an investment since I am investing my bitcoins rather than just leaving them in cold storage.

 hwere do you ınvest your bıtcoıns ??

That's the hard part.  Right now, I have my coins in a Coinlender CD, but it's gotten a bit crazy there.  TradeFortress assured me that he's not planning on shutting the site down before my CD expires, but after that happens (in about another month), I'll be looking for another place to invest my bitcoins.  Thinking of Cloudhashing, but I'm really not sure what I'll do once I take them out of Coinlenders.

[Dorrace]

I'll freely admit my motivation for buying bitcoins was reason #1.  Even at ~$100, it still has a lot of room to appreciate if it catches on.  But I also use it as an investment since I am investing my bitcoins rather than just leaving them in cold storage.

 hwere do you ınvest your bıtcoıns ??

That's the hard part.  Right now, I have my coins in a Coinlender CD, but it's gotten a bit crazy there.  TradeFortress assured me that he's not planning on shutting the site down before my CD expires, but after that happens (in about another month), I'll be looking for another place to invest my bitcoins.  Thinking of Cloudhashing, but I'm really not sure what I'll do once I take them out of Coinlenders.

just dice is pretty neat for investing you get 10% of 1% of the profits from the casino so its pretty good if you intend to let your coin sit for a year or so

[halfawake]

just dice is pretty neat for investing you get 10% of 1% of the profits from the casino so its pretty good if you intend to let your coin sit for a year or so

10% of 1% of the profits?  That seems like an odd way of putting it.  Why not just call it 0.1% of the profits?

[rix5]

some people buy btc because it is more effective than just protest the banks ... for some of us it is an act of rebellion to do so.

[NoNotTheDuo]

Some of us have the ability to buy at coinbase price and sell locally at MtGox price.  That's my motivation for buying right now.
Also, buying gift cards/items that I normally would have purchased at a discount, just by using btc.  That's a huge motivation.

[halfawake]

Some of us have the ability to buy at coinbase price and sell locally at MtGox price.  That's my motivation for buying right now.
Also, buying gift cards/items that I normally would have purchased at a discount, just by using btc.  That's a huge motivation.

I didn't know that was an option.  Oh wait, you mean selling to people in person.  Yeah, that could work, if you can find buyers.

The buying stuff is definitely a good idea too.  There is a 16 GB RAM chip that I'm tempted to buy on Bitcoin store one of these days - last I checked, it was something like $20 cheaper than Amazon.com, which is pretty impressive.

[johnyj]

Currently the liquidity of all exchanges are still low, when major exchanges are established, the international transfer utility of bitcoin can become more useful

Take localbitcoins.com for example, if large volume of trade can be done in each country, then international money transfer can be done over night

By the way, this will not affect the exchange price, since the amount of buy and sell is always the same. So even the demand for transaction increased, it does not mean the price of transaction medium will rise, this is a good example of supply and demand do not necessarily change the value of money

[tskweres]

Purchase Bitcoin because it's the future of money, plain and simple. Not only that, but it's a great investment. The governments currently managing fiat currencies aren't exactly doing a stellar job of managing debt, inflation etc.

Bitcoin is transparent and as valuable as the people that use it. So as more people use it, naturally it will appreciate.