Follow the Money

[CurbsideProphet]

(Keep in mind this is the SPECULATION section)

Outside of speculation, what's likely the largest use of Bitcoin?  Drugs.  A billion dollar industry. 

Drug dealers use Bitcoin for their anonymity.  Their profit is off the illegal product, whether the medium of exchange appreciates or depreciates is probably either secondary or of little importance to them.  The stability, however, is of importance.  Like any other vendor, being able to keep price relatively stable allows them to forecast profits.

An industry with the money, the need, and the means to keep Bitcoin stable.  And lo and behold, Bitcoin price has become very stable (admittedly over the short term).  I'll admit even as I write this myself it has a little "tin foil hat" ring to it.  But I don't think it's out of the realm of possibility that we're seeing a coordinated effort by the drug market to keep Bitcoin prices stable.  They're the only industry right now that really uses Bitcoin to a great degree and has the capital to move the market as they see fit.  If all this is true, I would figure this flatline trend will continue for quite some time. 

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[evoorhees]

They're the only industry right now that really uses Bitcoin to a great degree and has the capital to move the market as they see fit. 

Source?

[CurbsideProphet]

They're the only industry right now that really uses Bitcoin to a great degree and has the capital to move the market as they see fit. 

Source?

None.  Pure speculation.  If you have a source to refute, I'd be glad to hear it.

[error]

If true, it's very good news for Bitcoin.

[jago25_98]

 There's only SilkRoad and there's not a lot going on there at all.

I don't expect big drug players to take to the technical side. That is, if they got the money they wouldn't trust it.

 Sure, small time ganja growers and even cottage industry labs probably use it but I just got a feeling that any use is going to be new people to the trade rather than big gangs.
Then again maybe they really did look into it and decide that the way they already do it is better because Bitcoin is alot more traceable than this, and while this could be worked around maybe it's best to play safe and stick with however which way they already do it.

 I haven't seen much drug trade at all. Has anyone else?

I have seen tax dodging and bypassing border controls. I think that's the big one, but that's not USA specific so I expect it gets missed.

All this of course most conjecture too.

[Torminalis]

What complete nonsense. The only big reason to do that rather than deal in USD is pushing large amounts of money across borders. The Bitcoin market simply isn't liquid enough to do that at the moment. Otherwise we would be seeing large volumes on at least two different currency exchanges.

[evoorhees]

They're the only industry right now that really uses Bitcoin to a great degree and has the capital to move the market as they see fit. 

Source?

None.  Pure speculation.  If you have a source to refute, I'd be glad to hear it.

If you have a source to refute my belief in the flying spaghetti monster I'd like to hear THAT! Until then, I'll continue to believe it.

All kidding aside... obviously Bitcoin is effective for the illegal drug market, but that's not sufficient reason to make a statement as strong as yours.

[netrin]

Outside of speculation, what's likely the largest use of Bitcoin?  Drugs.  A billion dollar industry.  

Do you intend to use the future tense?

I don't know what drugs are, but if I did, I might consider dry powdered alkaloid packaged in airtight dark containers to be an excellent storage of value. I might assume demand/addiction to out perform gold in a fiat collapse.

I don't think bitcoin plays a significant role in the current or future drug market. Money laundering and trafficking as a side effect, perhaps, but let's not confuse things. Your typical junkie is not buying drugs with bitcoins.

Drug dealers use Bitcoin for their anonymity.

They do? Or could? Or should? What are you saying?

An industry with the money, the need, and the means to keep Bitcoin stable.  And lo and behold, Bitcoin price has become very stable (admittedly over the short term).

What stability drugs are people eating? No one can artificially hold prices unless they own the entire stock! (traders can smooth the curves, initiate rallies and falls, create fear, but the results of demand can not be hidden) Volatility sucks if there is an equally likely up and down rate. But no rational holder would not prefer exponentially increasing purchasing power. You could argue that launderers would prefer derivatives (locking in future gains), but not stability of the underlying asset if the natural trend is exponential growth up.

If as you claim the billion dollar industry is using bitcoins today, then the price has no choice but to be above $142 per bitcoin today. You can't secretly buy and sell millions of bitcoins each day without the market noticing.

...

Let's imagine for a moment a drug cartel from South America moves tons of drugs in to the US and sell it for dollars. Someone BUYS a ton of bitcoins and then transfers those bitcoins to institutions in South America. Then perhaps the drug lords automatically SELL an equal amount of bitcoins and transfer their dollars to bank accounts in the Cayman Islands. The drug lords then pay sophisticated traders to manipulate the market. But why bother and for what gain if they are immediately converting the money to dollars anyway.

Alternatively, let's say the South Americans decide to HOLD the bitcoins in Mt. Gox because they have nothing better to do than hire a bunch of guys to sit around (or program bots) holding their asset prices stable. They continue shipping and selling drugs around the world and BUYING more bitcoin. Rather than allow bitcoins to logically appreciate, they spend more money and time suppressing the value of their bitcoins because... uh... wait... why would they do that?

[CurbsideProphet]

They do? Or could? Or should? What are you saying?

They do.  Do you dispute this?

If as you claim the billion dollar industry is using bitcoins today, then the price has no choice but to be above $142 per bitcoin today. You can't secretly buy and sell millions of bitcoins each day without the market noticing.

I said drugs are a billion dollar industry.  I never said the entire industry is using Bitcoin. 

Rather than allow bitcoins to logically appreciate, they spend more money and time suppressing the value of their bitcoins because... uh... wait... why would they do that?

Again you're putting words in my mouth.  I did not say they are suppressing anything.  I said they do not care about the appreciation nor the depreciation of Bitcoin, only the stability.  The fact that you feel Bitcoins will logically appreciate only shows your bias.  Maybe they're propping up the price?  Who knows.

To everyone else, this is merely speculation on my part.  Put in the SPECULATION section of the board.  I don't have statistics or hard numbers to bring, if I did, I would put this somewhere else.  I'm just looking at the current Bitcoin market and coming up with a hypothesis.  I thought it might be a nice change from the "buy! buy! buy" "sell! sell! sell!" threads that pop up every time BTC moves ten cents. 

[netrin]

Please excuse me. I understood your post to claim that drug dealers were keeping the price stable. However, after re-reading your post, I can see you were referring to volatility. I was wrong.

However, whether drug dealers or not, market stability is in everyone but the day traders' best interest. Indeed stability is often a symptom of an efficient speculative market.

[Alex Beckenham]

I understood your post to claim that drug dealers were keeping the price stable. However, after re-reading your post, I can see you were referring to volatility.

What's the difference? Besides that they're opposites of each other.

[Jack of Diamonds]

there's only Silkroad

Silkroad is not the only onion site selling drugs.
English speaking countries are not the only countries selling and buying drugs.

There are tons of hidden services not listed in any directory with fast user interfaces and loads of users.
There are tons of sites on freenet and i2P selling drugs, weapons, etc.

Just a few hints. (I'm not a druggie, merely saying what's happening)

[netrin]

I understood your post to claim that drug dealers were keeping the price stable. However, after re-reading your post, I can see you were referring to volatility.

What's the difference? Besides that they're opposites of each other.

Price stability (whose opposite is price instability) is close to or nearly 0% inflation, such as the EU's stability pact which "in the pursuit of price stability, it aims to maintain inflation rates below, but close to, 2% over the medium term." If one believes dollars or euros are stable, then a price stable bitcoin exchange rate would be pegged to one of them (for example $14 for ever).

Market volatility (whose opposite is a mythical market stability) refers to the rapid inflation and deflation irrespective of long term trends (although those can be volatile as well). Volatility is essentially the risk of investing in an asset, the deviation from average trends on any scale. (for example 1% deviation from closing price)

It is difficult to imagine a price stable asset with high market volatility. But the converse, such price adjusted controls during hyperinflation or electronics whose prices rapidly deflate but display moderate market volatility (the prices of do not generally deviate rapidly from day to day).

"Volatility is only a good measure of risk if you feel that being rich then being poor is the same as being poor then rich".

-- Peter Carr

[Edward50]

I was thinking, if drug dealers/users used bitcoins to buy and sell drugs,. Wouldn't it really have no effect on the bitcoin price?

I would speculate that if someone wanted to do a drug transaction there would be a buy order for bitcoins, and then right after the drugs are sold there would probably be a sell order for bitcoins. I do not think any of the parties would hold onto their bitcoins unless the drug dealers wanted to speculate.

This buy and sell would happen rather quickly, maybe even in the same few hours.

[SlipperySlope]

From the Rick Falkvinge blog post http://falkvinge.net/2011/06/16/bitcoins-four-drivers-part-one-unlawful-trade/  ...

Between 5% and 30% of the world’s money supply of about 75 terabucks are in circulation to support unlawful trade. The guesstimates vary due to the nature of the subject. Let’s assume 5%, and then let’s move on to guesstimate that 10% of those 5% is in high-tech trade that would be early adopters of Bitcoin (the kind of merchants capable of building intercontinental undetectable submarines).
Let’s assume that these merchants move about one-sixth of their trade to Bitcoin over the coming years to explore it and use it for long-distance transactions. That would mean 15% of 10% of 5% of 75 terabucks enter the Bitcoin ecosystem, which comes down to about 60 gigabucks. The current value of Bitcoin in circulation is roughly 6.5 megacoins times 20 bucks, coming to about 120 megabucks.

Rick argues that unlawful trade will be an important early adopter of bitcoins.  He goes on to write about three other much larger bitcoin adoption drivers.

[bitbot]

You follow drugs, you get drug addicts and drug dealers.
But you start to follow the money, and you don't know where the fuck it's gonna take you.

[netrin]

You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don't know where the fuck it's gonna take you.

Bitbot. I considered reporting you but perhaps that was wildly clever and I just didn't follow the joke.

I was thinking, if drug dealers/users used bitcoins to buy and sell drugs,. Wouldn't it really have no effect on the bitcoin price?

I would speculate that if someone wanted to do a drug transaction there would be a buy order for bitcoins, and then right after the drugs are sold there would probably be a sell order for bitcoins.

A money has value inherent in its property as a medium of exchange. The trading of a money facilitates production and consumption, generating wealth denominated in that money. If parties are immediately and rapidly buying and selling large quantities of a money on the public market, they are increasing liquidity, smoothing out the volatility, and that alone makes the money more valuable. Otherwise, you're right. If I sell you a bitcoin for $1 and buy it back for $1 the market doesn't flinch.

[bitbot]

what would you report me for?

and yes you aren't smart enough to get that reference

[nhodges]

(Keep in mind this is the SPECULATION section)

Outside of speculation, what's likely the largest use of Bitcoin?  Drugs.  A billion dollar industry. 

Drug dealers use Bitcoin for their anonymity.  Their profit is off the illegal product, whether the medium of exchange appreciates or depreciates is probably either secondary or of little importance to them.  The stability, however, is of importance.  Like any other vendor, being able to keep price relatively stable allows them to forecast profits.

An industry with the money, the need, and the means to keep Bitcoin stable.  And lo and behold, Bitcoin price has become very stable (admittedly over the short term).  I'll admit even as I write this myself it has a little "tin foil hat" ring to it.  But I don't think it's out of the realm of possibility that we're seeing a coordinated effort by the drug market to keep Bitcoin prices stable.  They're the only industry right now that really uses Bitcoin to a great degree and has the capital to move the market as they see fit.  If all this is true, I would figure this flatline trend will continue for quite some time. 

Do you really think (most) people are trading on Mt. Gox just to score some dope? 

If you want to talk purely "black market" I would say the largest use of Bitcoin is (or soon will be) gambling. It allows circumvention of the online gaming laws that have been popping up around the world.