What happens when the music stops?

[revans]

Let's say Bitcoin's price stabilises  where it is now, and remains like that for a few months. Given the fact that the vast majority of Bitcoin transactions are currently for speculative purposes, is it reasonable to assume there will be a fairly monumental sell off? Therefore it could be said that for Bitcoin to  maintain the engagement of the userbase it has attracted it will need to provide speculators with continual profitability.

[ardana123]

People will keep coming to invest if the price keeps rising. Publicity will take car of that. We've reached 500$, next week a new horde of investors will come. When we reach the milestone of 1000$, this will be even more widely publicized and an even bigger horde of investors will come. And so on.

[Wekkel]

The music will most certainly stop..... but Bitcoin will stay.

[Wilhelm]

If the music stops and a selloff happens latent buyers will try to get in driving the price back up again.

[User705]

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

[revans]

People will keep coming to invest if the price keeps rising. Publicity will take car of that. We've reached 500$, next week a new horde of investors will come. When we reach the milestone of 1000$, this will be even more widely publicized and an even bigger horde of investors will come. And so on.

Investors indeed, because Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency. Bitcoin has developed a Forex market prior to establishing itself as a currency with widespread utility.

[revans]

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

There is a lot of truth in that. Bitcoin is a speculative investment vehicle, but unlike most others one cannot readily short it. There is no counter to the irrational exuberance.

[emanymton]

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

There is a lot of truth in that. Bitcoin is a speculative investment vehicle, but unlike most others one cannot readily short it. There is no counter to the irrational exuberance.

Who decides whether or not the exuberance is irrational or not?
How can you be sure that it's not rational?

[Bitcopia]

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

There is a lot of truth in that. Bitcoin is a speculative investment vehicle, but unlike most others one cannot readily short it. There is no counter to the irrational exuberance.

Who in their right mind would short bitcoin? I mean, yeah in short time frames during crashes it makes sense, but bitcoin is in a perpetual up trend. Shorting bitcoin would be dangerous.

Also, shorting is not a natural market feature. You can buy bitcoins. You can sell bitcoins. That's a natural marketplace. As rational or irrational as the exuberance may be, saying you need to allow shorting to keep it in check doesn't make sense to me.

[oda.krell]

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

Who says you can't short? That possibility exists, for example on bitfinex, but you will notice it isn't used much, or rather: there's not much weight behind it. Which is kind of understandable if one considers that, except for (relatively) short periods of time, the only direction of $/btc is up uP UP.

[BTCtrader71]

Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency.

Why do you say this? There is no reason that Bitcoin cannot be both a currency and a store of value (speculative instrument) at the same time.

[revans]

The markets can remain irrational longer then you can stay solvent and in the absence of the ability to short sell the only possible pressure is up.

There is a lot of truth in that. Bitcoin is a speculative investment vehicle, but unlike most others one cannot readily short it. There is no counter to the irrational exuberance.

Who in their right mind would short bitcoin? I mean, yeah in short time frames during crashes it makes sense, but bitcoin is in a perpetual up trend. Shorting bitcoin would be dangerous.

Also, shorting is not a natural market feature. You can buy bitcoins. You can sell bitcoins. That's a natural marketplace. As rational or irrational as the exuberance may be, saying you need to allow shorting to keep it in check doesn't make sense to me.

You see, phrases like 'perpetual up trend' are always going to come back to haunt you.

[revans]

Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency.

Why do you say this? There is no reason that Bitcoin cannot be both a currency and a store of value (speculative instrument) at the same time.

At the moment it is neither.


A store of value can be relied upon to return to you at least  roughly what you put in; you might make a lot of profit, and if you do lose out it won't be a massive loss. It is stable and reliable. Bitcoin has been both a money making and money losing proposition for those that have been invested in it, but it has never been a stable store of value.


Think of it this way. You have 100M dollars worth of gold, and you can either keep it as gold or covert it to Bitcoin. Whichever you choose you then cannot do anything with it for 5 years. Which option would you choose any why?

In those 5 years Bitcoin might have hit 4 figures, and then crashed back down to ziltch.

[freebird]

Investors indeed, because Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency. Bitcoin has developed a Forex market prior to establishing itself as a currency with widespread utility.

I actually think this is the natural and logical progression. First, bitcoin will become a replacement for gold in many people's investment portfolios. As that happens, the price will go up very fast, until eventually everyone who wants some bitcoin has some. Eventually it will level off and people will start using it more as a currency, for commercial transactions.

The reason we're not seeing a huge amount of bitcoin commerce yet is precisely because it's currently functioning more as a highly lucrative investment vehicle. But the era of 10x gains per year, or even 2x gains, is not going to last forever. I'd give it just a few more years. Then, mass commercial adoption as the last phase of bitcoin's growth.

For more of my thoughts on this, see the thread I started, The Four Phases of Bitcoin Growth: https://bitcointalk.org/index.php?topic=337151.0

[Odalv]

There will be silence.

[revans]

Useless troll is useless. Did you know 'speculative' forex trading volumes absolutely dwarf global gdp?

Gee, you don't think that's because there are lots of financial instruments that can be used to leverage huge amounts of money on Forex markets?

Moron.

[revans]

Investors indeed, because Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency. Bitcoin has developed a Forex market prior to establishing itself as a currency with widespread utility.

I actually think this is the natural and logical progression. First, bitcoin will become a replacement for gold in many people's investment portfolios. As that happens, the price will go up very fast, until eventually everyone who wants some bitcoin has some. Eventually it will level off and people will start using it more as a currency, for commercial transactions.

The reason we're not seeing a huge amount of bitcoin commerce yet is precisely because it's currently functioning more as a highly lucrative investment vehicle. But the era of 10x gains per year, or even 2x gains, is not going to last forever. I'd give it just a few more years. Then, mass commercial adoption as the last phase of bitcoin's growth.

For more of my thoughts on this, see the thread I started, The Four Phases of Bitcoin Growth: https://bitcointalk.org/index.php?topic=337151.0

And having see Bitcoin go on a price rollercoaster for a couple of years, what pray tell will induce retailers to accept it? I mean they might just get the impression that a load of speculators in tulip bulbs are looking to offload their currency onto them.

[freebird]

And having see Bitcoin go on a price rollercoaster for a couple of years, what pray tell will induce retailers to accept it? I mean they might just get the impression that a load of speculators in tulip bulbs are looking to offload their currency onto them.

The higher the price goes, the bigger the market cap and the more people are involved, so it would take more people and more money to move the price. Therefore, the price should in theory become more stable as it gains value, which will make it more viable for use as a currency.

[thezerg]

When the music stops your fiat won't be able to buy farmland, gold, silver or Bitcoin for ANY price 

[Bitcopia]

Investors indeed, because Bitcoin's primary utility is as a speculative investment vehicle, the problem is the better it serves this role the worst it becomes as a currency. Bitcoin has developed a Forex market prior to establishing itself as a currency with widespread utility.

I actually think this is the natural and logical progression. First, bitcoin will become a replacement for gold in many people's investment portfolios. As that happens, the price will go up very fast, until eventually everyone who wants some bitcoin has some. Eventually it will level off and people will start using it more as a currency, for commercial transactions.

The reason we're not seeing a huge amount of bitcoin commerce yet is precisely because it's currently functioning more as a highly lucrative investment vehicle. But the era of 10x gains per year, or even 2x gains, is not going to last forever. I'd give it just a few more years. Then, mass commercial adoption as the last phase of bitcoin's growth.

For more of my thoughts on this, see the thread I started, The Four Phases of Bitcoin Growth: https://bitcointalk.org/index.php?topic=337151.0

And having see Bitcoin go on a price rollercoaster for a couple of years, what pray tell will induce retailers to accept it? I mean they might just get the impression that a load of speculators in tulip bulbs are looking to offload their currency onto them.

Do you have any idea how Coinbase or BitPay's payment processing works? Merchants can select whether they want to receive payment in USD or XBT. There is no speculative risk if the merchant doesn't want it, and most won't until price stabilizes.

The great thing is, both services charge a flat 1% compared to VISA / MC average of 3 - 5%. This is because bitcoin is insanely efficient as a payment vehicle. There is no ACH necessary for a transaction anymore. That's a big deal. It is the next step in the evolution of payment systems, and what merchant wouldn't want to save 2 - 4% on transactions???