drop in btc value

[kiba]

Hi, I think speculation stabilizes markets.

I was waiting for this

It is no good that the other side decide to be lazy about it, but you're still not off the hook for making a claim without backing it up.

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[malditonuke]

This is only on MtGox. If other markets follow, than the price drop is for real.

Bitcoin Central followed and other markets are negligible.

I think anybody who wants a long-term success of Bitcoin should welcome price drops. There was nothing healthy in the rush to parity. The Bitcoin economy should grow by increase in the number of transaction and the value of items and services exchanged and not by price speculation.   

The exchange of things of value, whether tangible or not, in the economy is the real measure of how healthy the currency is, speculation just leads to instability. If Bitcoins end up being a speculator's plaything, I don't think adoption of BTC will ever take off in a meaningful way.

Meh, value is demonstrated by exchange, even in the case of speculation.  And the only difference between an investor and speculator is that the investor performs a risk assessment.

Market volatility, like savings, is due to uncertainty about the future.  That is the real enemy.

[bitcool]

Speculation is good, it brings liquidity to the markets. Let speculators lose sleep over these price swings, worry about big picture.


The problem is that we do not have enough speculators.

+1
I am for more speculators -- as long as they are using their own money, and there's no Fed or COMEX to bail them out if they loses their shirts.

[slush]

The problem is that we do not have enough speculators.

+1. More speculators = better liquidity, smaller spread.

[kiba]

Time to get assertions out of the way: http://mises.org/daily/320

Speculators, in essence, absorb the risks of trying to prices commodity, and gave us a more stable price for commodities.

Let put it this way: In time of plenty, the speculator save up food.  In time of famine, the speculator sell food to the starving populace. If he make mistakes in the prediction of the future, he will be punished for it. If he make successful prediction, he will be more wealthy. Thus, we can see how prices are smoothed throughout time.

[theGECK]

As I said earlier, it is above my abilities/current knowledge to know for sure or even do a good job at any analysis. But, here's my best shot at giving sources. I'll even give both sides!

Speculation does not increase stabilization of a market:
http://home.maryknoll.org/index.php?module=MKArticles&func=display&id=1365&office=alert - Speculators pay fewer taxes on a given good than the producers of that good. Also caused a large spike/drop when funds were pulled out.
http://www-personal.umich.edu/~alandear/glossary/d.html#DestabilizingSpeculation
http://michaelguth.com/economist/chap1.htm - how speculation can cause instability, and how to profit from it.

Speculation does increase stabilization of a market:
http://www.informaworld.com/smpp/content~db=all~content=a713761642~frm=abslink
http://www-personal.umich.edu/~alandear/glossary/s.html#StabilizingSpeculation
http://mjperry.blogspot.com/2008/05/quote-of-day-friedman-on-speculators.html - in the comments they talk about how short-term speculation can cause destabilization of a market.

Argues Both Points:
http://www.islamic-world.net/economics/speculation_and_gambling.htm
http://en.wikipedia.org/wiki/Foreign_exchange_market#Speculation
http://en.wikipedia.org/wiki/Speculation - a tax on speculating may stabilize a currency

From what I've read while doing this fast research, speculating may lend stability to markets that are thinly traded or small (which would include bitcoin at the moment), but when the speculating makes up a large percentage (an "excess level" which varies depending on time, product, liquidity, etc) then stabilization quickly goes the other way. The speculators soak up the risk, but when they soak up too much of the market then they are just trading amongst themselves and the wide and quick swings happen.

Obviously, I haven't had the ability to read through all of these, and am still researching it. It seems that I've been reading more pop culture than I assumed, so I'd appreciate others. But please don't just say that you're right because we can quote sources that say speculation stabilizes, it's clearly a debated field. Unless you have credentials in economic theory (which I definitely don't have), perhaps we should just table the discussion.

[kiba]

perhaps we should just table the discussion.

You're welcome to discuss it in the economic forum. I was merely trying to get people to think about their position more carefully, not winning debates.

[marcus_of_augustus]

moa:

February 16, 2011, 03:56 am
   Reply with quote Edit message Delete message  #19
The bitcoin tech. analysis guy is saying an ascending wedge (triangle) forming around 1.05 btc/$ ... I'm seeing a descending flag, either way something is gonna give and the timeframe is around the time of the next jump in difficulty.

So the miners/supply and the demand are both aware of this point in time as when they make their next decision and are susceptible to changing their expectations around then. The miners/supply have come down from above, 1.10, and sold down to 1.05, the demand has come from less than 1.00 and bought up to 1.05 .... myself I feel like a revisit of the 0.80 region is on the cards but it will be brief and then it is off up above the 1.10 to who knows where ... still some confidence issues to work through though it seems.

Anybody who feels they benefitted from the above call and would like more such analysis can send BTC to  : 1N7fbp5MsprSmTWgZvdD9G9UdHebH4dYcX

(Been doing this for over 15 years in gold and commodities market.)

[Mahkul]

Good time to be buying. 

[schnak]

were i to guess id say its the backend of the slashdot and twit effects. someone sells a decent amount of BTC, those that entered it for kicks decided they were bored with it and cashed in before a major drop, thereby causing a >20 point drop. that brought a few extras in deeper because of crazy low prices (in compairson) and its leveling off at a net 7point slide. would expect to see a few more of these following a fad issued surge.

like mahkul said, good time to buy.

better to start offering services or merchandise.

[kiba]

For the love of Eris, stop proposing causes about things you don't know!

[breandan81]

We really need more users, and I'm a bit worried that the people who have huge amounts of bitcoin squirreled away from when it was easy to generate can, even inadvertently, cause huge fluctuations.  If bitcoin is going to acheive mainstream acceptance as an online currency the value needs to be somewhat stable, at least to the point that people are confident that if they are only using it for online transactions that they can trade back to their currency of choice without a large loss in value. 

[Nefario]

We really need more users, and I'm a bit worried that the people who have huge amounts of bitcoin squirreled away from when it was easy to generate can, even inadvertently, cause huge fluctuations.  If bitcoin is going to acheive mainstream acceptance as an online currency the value needs to be somewhat stable, at least to the point that people are confident that if they are only using it for online transactions that they can trade back to their currency of choice without a large loss in value. 

I doubt if someone who has a big stash of bitcoins is going to dump the whole lot in one go, surely if they do have a large amount then they think it's valuable. Therefor they will hold on to as much as they can, and will spend or exchange only when they need to, which will be in smaller amounts.

I speculate that such a person is more likely to trade with their bitcoins than exchange them. Unless you hsve a high constant income in bitcoins exchanging them for a little cash seems.... a waste, especially if they are the users savings. I would also speculate that these people are more likely to invest their bitcoins than just spend them on goods or services.

[rebuilder]

I doubt if someone who has a big stash of bitcoins is going to dump the whole lot in one go, surely if they do have a large amount then they think it's valuable.

They will sell if they get antsy or simply believe the price is as high as it is likely to go for a while. Or if they need the cash. It's pretty hard to predict what people do.

[mcdett]

I doubt if someone who has a big stash of bitcoins is going to dump the whole lot in one go, surely if they do have a large amount then they think it's valuable.

They will sell if they get antsy or simply believe the price is as high as it is likely to go for a while. Or if they need the cash. It's pretty hard to predict what people do.

If you could predict what people did you could make BILLIONS of dollars.

I thought about trying to time the bitcoin market.  Theoretically I could have sold at $1.10 and bought back in at $0.75, and my hindsight clearly sees that as a winner!

[Raulo]

Anybody who claims to know what will happen on the market is either a fool or tries to pump the value of his holdings (that's why there is consistent bullish bias everywhere on the stock market). Or both.

[amwt]

Volume is a good thing.

[unclescrooge]

This is only on MtGox. If other markets follow, than the price drop is for real.

Bitcoin Central followed and other markets are negligible.

I think anybody who wants a long-term success of Bitcoin should welcome price drops. There was nothing healthy in the rush to parity. The Bitcoin economy should grow by increase in the number of transaction and the value of items and services exchanged and not by price speculation.   

agreed

[Bruce Wagner]

I will listen to anyone's opinions on this.....  EXCEPT those who have...

credentials in economic theory

....because they are like film and theater critics:   (1) full of themselves, and (2) almost always wrong.

[Nefario]

I will listen to anyone's opinions on this.....  EXCEPT those who have...

credentials in economic theory

....because they are like film and theater critics:   (1) full of themselves, and (2) almost always wrong.

+1

These are the "experts" running Ireland and Greece into the ground, the ones who said everything was fine in the economy even after it had gone over the edge and have been wrong on EVERYTHING.

Sadly these are also the people who seem to be in charge, which is one very important reason to get control of our money(and anything else we can) off them.