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Author Topic: Why Bitcoin will collapse in price.  (Read 24152 times)
knarzo
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December 07, 2013, 07:51:23 PM
 #21

Bitcoin is going up in price because people believe it will be used as a medium of exchange and store of value. If they realise this wont happen it will collapse in price. So lets look at these two aspects.

1) Medium of exchange.

Bitcoin is only a medium of exchange when merchants accept it and hold onto it. Right now merchants are dumping bitcoin for dollars, so its not being used as a medium of exchange. This btw. also throws the transaction cost benefit argument right out of the window (spread).

Now will merchants ever accept bitcoin and hold onto them?
No.

Why?

a) Governments have already effectively made it impossible for people to use bitcoin as a medium of exchange, as they expect taxes to be paid on bitcoin gains. Thus it cant function as a medium of exchange (same goes for gold btw.). Unless Government loses its control on its money monopoly this law wont be altered.

b) Governments will prohibt merchants from accepting bitcoins. Again: They will never give up their monoply on money.

2) Store of Value

After people realize that merchants are not adopting bitcoin and that it is not used as a medium of exchange, it will collapse in price. Will anybody store significant wealth in Bitcoin after this spectacular collapse? Not likely.

Also Bitcoin is a technology, that can be outcompeted by other altcoins. Your wallet can be hacked. The average citizen cant judge if the code can or can not be hacked and thus more bitcoins created. If you want to store wealth over a long period of time investing in a technology is not the best and easiest option. Also Bitcoin is not useful or wanted. If you ask a Bitcoiner what can I do with it they will say: dump it on the next guy it will go up in price! Gold and Silver where always wanted (jewlery and nowadays industry) and thats why they became MONEY in the first place! They have unique properties and everybody love to hold them in their hand. This will always be the case ensuring significant value and acceptance. Nothing like this can be said for bitcoins. Thus I dont believe bitcoin will function as a store of value in any significant way.

Conclusion:

I predict bitcoin to collapse in price (as it wont be used either as a medium of exchange nor as a store of value).

EDIT: The price increasing shows bitcoin is used as a speculative vehicle. It does not demonstrate bitcoins viability as a store of value or medium of exchange.

(Additional line of attack for governments: Government could come down hard on miners. They could make it illegal to mine bitcoins. Then bitcoin will lose all of its advantages compared to alternative cryptocurrencies. It will be a code like the rest of them.)


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December 07, 2013, 07:52:46 PM
 #22

What we would need to get around the capitol-gains tax issue is a Stable-value, High-velocity coin.  It would move from one person to the next sufficiently fast that people do not hold it for long enough to incur any gains.  Freicoin aims to do this via Demurrage, which reduces nominal coins held in all wallets 5% a year.  This would increase velocity and if we could find a way to keep valuations change to less then the rate of Demurrage (so far no crypto has found out how to be stable, it is the Holy-Grail) then their would never be any capitol-gains to pay and no death-by-taxation scenario.



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deisik
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December 07, 2013, 07:54:15 PM
 #23

I have already replied to you see post above.

Again merchants cant use bitcoin as media of exchange because they would have to pay taxes on any gain in value of bitcoin itself which is much to cumbersome as it involves enormous paperwork. Thats why we have no competition in media of exchange. Again its one way the government makes sure only dollars are used, there are other ways as I have explained.

Could you please provide a link? Can't find your answer to my post...

You may think as you please really, but I find your argument on taxing exchange rates differences very weak. It is simply beyond my understanding how Bitcoin may fail just because of some paperwork. It may actually fail in the end, but this apparently won't be for capital gains taxes. As to me, that would be equal to saying that an enterprise would go bankrupt just for gaining some surplus profit... How come?

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December 07, 2013, 08:02:42 PM
 #24

What we would need to get around the capitol-gains tax issue is a Stable-value, High-velocity coin.  It would move from one person to the next sufficiently fast that people do not hold it for long enough to incur any gains.  Freicoin aims to do this via Demurrage, which reduces nominal coins held in all wallets 5% a year.  This would increase velocity and if we could find a way to keep valuations change to less then the rate of Demurrage (so far no crypto has found out how to be stable, it is the Holy-Grail) then their would never be any capitol-gains to pay and no death-by-taxation scenario.

If we have to pay capital gains, then we should be able to claim investment losses too.

The street runs both ways.

So, if you bought BTC at $1000, and now it's $700, and you bought 5 BTC, you can claim $1500 in loses on your taxes.

Congrats !
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December 07, 2013, 08:12:58 PM
 #25

What we would need to get around the capitol-gains tax issue is a Stable-value, High-velocity coin.  It would move from one person to the next sufficiently fast that people do not hold it for long enough to incur any gains.  

No that wont work. Any business has a significant pool of savings it does not want to spend immediatley.

Also your point about stable value is not really relevant as its mainly about the enormous paper work businesses would have to fill out. Even small gains will have to be reported.
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December 07, 2013, 08:35:17 PM
 #26



Its easy to predict that governments wont allow to be outcompeted by bitcoin. They have a money monopoly and thus will prohibit significant competition. Thats different than prohibiting alcohol as the merchant can accept dollars instead. No need to accept bitcoins. However alcohol is something you cant replace. Also alcohol is not where government derives its power from. Money is (inflation to finance its operation). It is already impossible for bitcoin to become a significant medium of exchange due to tax law.

Now regarding store of value I have explained why I think bitcoin is not suitable.


Can the government prohibit me to use, for instance, dollars to pay people (if they agree) even if I am in italy?

Would such prohibition be compatible with the italian constitution? Is there something in such constitution that states that we in Europe must use as medium of exchange only euros?

As far as I am concerned the only thing that government can force us is to accept "state" money in repayment of debts. That is because there is no alternative.

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December 07, 2013, 08:36:46 PM
 #27



Its easy to predict that governments wont allow to be outcompeted by bitcoin. They have a money monopoly and thus will prohibit significant competition. Thats different than prohibiting alcohol as the merchant can accept dollars instead. No need to accept bitcoins. However alcohol is something you cant replace. Also alcohol is not where government derives its power from. Money is (inflation to finance its operation). It is already impossible for bitcoin to become a significant medium of exchange due to tax law.

Now regarding store of value I have explained why I think bitcoin is not suitable.


Can the government prohibit me to use, for instance, dollars to pay people (if they agree) even if I am in italy?

Would such prohibition be compatible with the italian constitution? Is there something in such constitution that states that we in Europe must use as medium of exchange only euros?

As far as I am concerned the only thing that government can force us is to accept "state" money in repayment of debts. That is because there is no alternative.

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ilpirata79


Reread the thread: They force us by expecting us to pay capital gains taxes on every media of exchange thats not government currency.
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December 07, 2013, 08:42:10 PM
 #28

Reread the thread: They force us by expecting us to pay capital gains taxes on every media of exchange thats not government currency.

Why is that a problem? If bitcoin value increases compared to local fiat it's good for the merchant. They will pay capital gains which are ONLY a fraction of such gain. If they lose value or stay the same, no problem.

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December 07, 2013, 08:48:05 PM
 #29

Reread the thread: They force us by expecting us to pay capital gains taxes on every media of exchange thats not government currency.

Why is that a problem? If bitcoin value increases compared to local fiat it's good for the merchant. They will pay capital gains which are ONLY a fraction of such gain. If they lose value or stay the same, no problem.

Best regards,
ilpirata79

Think again: If Bitcoin should become money it has to be stable. It wont increase the entire time. Even today we have a volatile market so I cant be sure if I gain or loose.

Hint: Its about the paperwork. Thats why we dont have competition in media of exchange.
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December 07, 2013, 08:49:41 PM
 #30

Reread the thread: They force us by expecting us to pay capital gains taxes on every media of exchange thats not government currency.

Why is that a problem? If bitcoin value increases compared to local fiat it's good for the merchant. They will pay capital gains which are ONLY a fraction of such gain. If they lose value or stay the same, no problem.

That guy seems to be impossible to explain this. His argument is now reduced to the assertion that Bitcoin will fail because of paperwork businesses would have to fill out for exchange rate gains. I hope somebody would come here and explain it in detail whether it actually requires that much work and how often

Personally, I don't believe him but have no experience in this field to refute with competence...

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December 07, 2013, 08:59:30 PM
 #31

Reread the thread: They force us by expecting us to pay capital gains taxes on every media of exchange thats not government currency.

Why is that a problem? If bitcoin value increases compared to local fiat it's good for the merchant. They will pay capital gains which are ONLY a fraction of such gain. If they lose value or stay the same, no problem.

That guy seems to be impossible to explain this. His argument is now reduced to the assertion that Bitcoin will fail because of paperwork businesses would have to fill out for exchange rate gains. I hope somebody would come here and explain it in detail whether it actually requires that much work and how often

Personally, I don't believe him but have no experience in this field to refute with competence...

No my argument is that bitcoin wont become a media of exchange because government enforces its monopoly on money with all its might.

Now one of the way it does so is by taxing other media of exchange (if you cant grasp that I cant help you).

Other ways are (as explained above):

1) Prohibiting merchants from accepting bitcoins 2) Raiding exchanges 3) Raiding miner networks

The list is endless.

Why do you think gold is not used as money? If the market before chose it to be money? Any guess.
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December 07, 2013, 09:16:01 PM
 #32

That guy seems to be impossible to explain this. His argument is now reduced to the assertion that Bitcoin will fail because of paperwork businesses would have to fill out for exchange rate gains. I hope somebody would come here and explain it in detail whether it actually requires that much work and how often

Personally, I don't believe him but have no experience in this field to refute with competence...

No my argument is that bitcoin wont become a media of exchange because government enforces its monopoly on money with all its might.

You could just have said at the start without much beating about the bush that government would outright ban Bitcoin, and nobody would be arguing with you on that point. Though this has been discussed so many times here that you could hardly add anything new to the debate and that would be boring...

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December 07, 2013, 09:17:45 PM
 #33

What paper work are you talking about?
As of now, you just have to declare your capital gains at the end of the fiscal year; that at least in Italy.

I don't see why things should be made more complicated in the future only for bitcoins.

Regarding the banning of bitcoin tout court by a single country (already been discussed as just pointed out), I think that that would be a big mistake for the country that is making such a decision, because its businesses would be damaged internationally with respect to other businesses that can accept bitcoins.

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December 07, 2013, 09:19:59 PM
 #34

That guy seems to be impossible to explain this. His argument is now reduced to the assertion that Bitcoin will fail because of paperwork businesses would have to fill out for exchange rate gains. I hope somebody would come here and explain it in detail whether it actually requires that much work and how often

Personally, I don't believe him but have no experience in this field to refute with competence...

No my argument is that bitcoin wont become a media of exchange because government enforces its monopoly on money with all its might.

You could just have said at the start without much beating about the bush that government would outright ban Bitcoin, and nobody would be arguing with you on that point. Though this has been discussed so many times here that you could hardly add anything new to the debate...

Thats the first part. (The new part is that government has already killed bitcoin as a media of exchange due to tax laws. You dont want to understand this which is fine. )

The second part is about its acceptance as a store of value.

Also I believe transaction costs are high if its not accepted as media of exchange.

If you cant refute these points the value is effectively 0.
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December 07, 2013, 09:20:05 PM
 #35

Why do you think gold is not used as money? If the market before chose it to be money? Any guess.

There can be no "guesses" about it. Currency backed up by gold (or any other asset limited in supply, for that matter) had been a cause of much headache in the past due to its deflationary nature. The problems with gold backed money finally culminated in the Great Depression of 1929. After that the gold standard to which you appeal here had been quickly abandoned by all states...

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porc
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December 07, 2013, 09:22:33 PM
 #36

What paper work are you talking about?
As of now, you just have to declare your capital gains at the end of the fiscal year; that at least in Italy.

I don't see why things should be made more complicated in the future only for bitcoins.

Regarding the banning of bitcoin tout court by a single country (already been discussed as just pointed out), I think that that would be a big mistake for the country that is making such a decision, because its businesses would be damaged internationally with respect to other businesses that can accept bitcoins.

Best regards,
ilpirata79

For merchants its complicated as they have to track the prices of bitcoin for each bitcoin they hold and sell. Why would a merchant want this? Again you keep assuming bitcoin will be adopted despite it being more complicated than government currency.

Why isnt gold used as money? Why is everybody using government money. Think about it. You are in love with bitcoin.
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December 07, 2013, 09:24:12 PM
 #37

Why do you think gold is not used as money? If the market before chose it to be money? Any guess.

There can be no "guesses" about it. Currency backed up by gold (or any other asset limited in supply for that matter) had been a cause of much headache in the past due to its deflationary nature. The problems with gold backed money finally culminated in the Great Depression of 1929. After that the gold standard to which you appeal here had been quickly abandoned...

Learn history. Gold has been used as money for thousands of years.

Your interpretation of the Great Depression is incorrect but lets not go into this.

I am asking you why nobody is using gold (not gold standard!) as a media of exchange. (The answer is tax laws!, like bitcoin).

knarzo
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December 07, 2013, 09:29:55 PM
 #38

Why do you think gold is not used as money? If the market before chose it to be money? Any guess.

There can be no "guesses" about it. Currency backed up by gold (or any other asset limited in supply for that matter) had been a cause of much headache in the past due to its deflationary nature. The problems with gold backed money finally culminated in the Great Depression of 1929. After that the gold standard to which you appeal here had been quickly abandoned...

Learn history. Gold has been used as money for thousands of years.

Your interpretation of the Great Depression is incorrect but lets not go into this.

I am asking you why nobody is using gold (not gold standard!) as a media of exchange. (The answer is tax laws!, like bitcoin).



Who wants to carry gold with him? And how do you pay a keg of beer and some snacks? Ah yeah. Those !@#$%^&* tax laws!

Sic parvis magna
deisik
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December 07, 2013, 09:35:49 PM
 #39

Learn history. Gold has been used as money for thousands of years.

Your interpretation of the Great Depression is incorrect but lets not go into this.

I am asking you why nobody is using gold (not gold standard!) as a media of exchange. (The answer is tax laws!, like bitcoin).

Because it is heavy, cumbersome, liable to tear and wear as well as counterfeiting and defacing. Actually, it is you who have to study history here. Silver coins were primarily used as a means of exchange, at least in Europe (don't know much about other countries), gold was stashed away as a store of value above anything else except jewelry...

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diedicar
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December 07, 2013, 09:40:41 PM
 #40

If I am wrong about these points government will come down hard on miners. They could make it illegal to mine bitcoins. Then bitcoin will lose all of its advantages compared to alternative cryptocurrencies. It will be a code like the rest of them.

What government? All the governments in the world? They could as well make it illegal to sell alcohol or cigarettes, but it doesn't stop people from investing in these branches. You are thinking too much about things you just can't predict.


Its easy to predict that governments wont allow to be outcompeted by bitcoin. They have a money monopoly and thus will prohibit significant competition. Thats different than prohibiting alcohol as the merchant can accept dollars instead. No need to accept bitcoins. However alcohol is something you cant replace. Also alcohol is not where government derives its power from. Money is (inflation to finance its operation). It is already impossible for bitcoin to become a significant medium of exchange due to tax law.

Now regarding store of value I have explained why I think bitcoin is not suitable.

define: "governments" .Today all governments are just individuals prone to lobbies instead than political partys. If bitcoin will succed is because governments ar not nearly powerful as lobbies and markets. Governments have no way to make mining or btc exchange illicit without incurring in constitutional issues, of course that's not the case of china, the ceo of baidu created the last pump, for the next there is a single player who can without any doubt push the btc to 30.000 (having loaded bunches before) and his name is bezos.  
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