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Author Topic: BTC Price Stability  (Read 1718 times)
allten
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September 05, 2011, 12:50:41 AM
 #1

After pondering BitCoin for some time, I've came to the conclusion that the price will never be stable. But I do not think it matters for the success of BitCoin. I also believe (could be wrong) that it would be impossible to come up with a CryptoCurrency that would be stable in price without sacrificing its decentralized virtue. And if one was supposedly made, it would always be open to manipulation out side the free market to the advantage of a few (in my opionion).

To understand my conclusion on BitCoin price, let's look at a currency backed by the commodity gold.
If deflation becomes a problem, the demand and price of gold goes up relative to the entire market. This lowers the threshold for gold miners to make a profit and so production is expanded accordingly. The reverse case is also true. If inflation become a problem, the threshold for gold mining profitably is increased and gold mining production is cut-back. In other words, the rate of new money injected into the economy is dictated by the free market and always adjusts accordingly making the gold currency VERY STABLE.

BitCoin on the other hand has the RATE of money injected into the market fixed in its algorithm. Weather the market needs more money or not does not matter. 50 BTC (or 25, 12.5, 6.25, etc.) is always injected into the market every 10 minutes. If the amount of non BTC money (usually Fiat currencies) comes into the system to purchase BTC at the same rate BTC is generated, then you get stable price; however, that has hardly been the characteristic of the BitCoin free market.

As stated at the beginning, this should not matter for BitCoin and the future of its success. The solution to this issue is found in the services that will most likely will spring up (if they haven't already) for merchants. Because BitCoin is SO VERY EASY to exchange, a merchant can except payment for a product or service in bitcoin and simultaneously be guaranteed the money-of-choice by an exchange service. In other words, the so called price instability weakness of BitCoin will be completely masked out by one of its many strengths.

Comments and input appreciated.
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NothinG
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September 05, 2011, 12:59:38 AM
 #2

We need to stop saying BTC is worth 8 USD (or whatever the current price is for exchange).
This is why BTC is unstable.

BTC should be worth whatever the buyer/seller wants to trade them for.

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September 05, 2011, 01:31:51 AM
 #3

We need to stop saying BTC is worth 8 USD (or whatever the current price is for exchange).
This is why BTC is unstable.

BTC should be worth whatever the buyer/seller wants to trade them for.

I Agree, untill we can define BTC as own Currency it will be just a speculation. BTC it's the perfect global indipendent currency. More Exchange we have in the globe and soon we see BTC worth it as own value!

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DiaperedDynamo
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September 05, 2011, 01:41:51 AM
 #4

To stabilize the price you'd need to tie it to a real value and not just speculation. If a major corporation said their product was worth five dollars or five bitcoins, then the bitcoin would be worth one dollar.

d times?
marty.lee
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September 05, 2011, 04:02:08 AM
 #5

I hate how the price has dropped. I bought 5 coins at 16 bucks, and now I am stuck with them. Mining is the best way for you to get bitcoins. My opinion on the price is that it is equal to the following equation:

(b*r)/(2500000-d) in USD

b = blocks
r = reward per block
d = difficulty

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Marty Lee

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Dyn Lean
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September 05, 2011, 04:05:39 AM
 #6

It seems to me like the price would be more stable if there were more commercial transactions involving buying and selling goods and services in exchange for bitcoins.  At the moment it seems the two most popular bitcoin activites are mining and speculating.
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September 05, 2011, 04:12:50 AM
 #7

It seems to me like the price would be more stable if there were more commercial transactions involving buying and selling goods and services in exchange for bitcoins.  At the moment it seems the two most popular bitcoin activites are mining and speculating.
True. True. We need to open bitcoin up to the world and make it so easy to integrate with bitcoin and entice businesses for doing so.

Kind Regards,
Marty Lee

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faustianover
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September 05, 2011, 04:28:39 AM
 #8

Bitcoins price relative to another currency cannot be disregarded that easily.
Let's say I create widgets. I have to buy the raw materials to make widgets. These materials are not sold by vendors who take BTC. I have to pay the local currency for my parts. Let's say they cost 440 Baht to make apiece.  at the time, 1 Bitcoin is worth 300 Baht. I factor in my time and overhead, and sell widgets for 2.5 BTC.  Then Bitcoin's value drops to 270  baht- Roughly a change of 1 USD, at the end of the week. I turn to exchange my BTC for Baht to pay bills, buy more parts- and my profits may have disappeared. How am I supposed to make money, or even guarantee that I can break even, with a volatile currency?

The buyers is just as at risk. If i buy a widget for 2.5 BTC, that means I value a finished widget at 750 Baht. Before my widget arrives, BTC increases to 330 baht. Great for the seller, but this means my widget effectively cost me 825 Baht- When if i had dealt with another widget seller, the price would have been 755 Baht.  Why would I want to spend BTC that may end up costing me more then I want to spend?
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September 05, 2011, 05:15:25 AM
 #9

I agree with the OP that eventually the stability of bitcoin won't matter.  Most people won't hold significant wealth in BTC (unless speculating) and services that guarantee funds @ certain external currency will spring up. 

i.e.

1) merchant wants to sell a widget for $16. 
2) Realtime exchange rate API puts exchange @ $8:1BTC and thus price on website is 2BTC.
3) Customer buys widget for 2BTC and wbsite API immediately locks in $16 USD for 2 BTC with "guarantor service".
4) Merchant is guaranteed funds in dollars regardless of how market moves.

Added bonus - speculators can now make money two ways (one currency moves & collecting fees on locking in exchange rates)


This doesn't address the issue that if the market moves up, it'll turn out my 2 bitcoins were worth more then 16 usd next week, and I'll feel I paid more then my widget was worth. If for example, the BTC value for me the day my widget arrived was $10 : 1btc, I'll feel that I could have had 4 more dollars, if I waited a week. This happens gradually with any currency, but when I'm looking at BTC price histories, I'm seeing pricechanges by over a dollar a day, and not infrequently.

methodsaint
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September 05, 2011, 05:29:34 AM
 #10

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
marty.lee
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September 05, 2011, 05:33:31 AM
 #11

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.

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NothinG
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September 05, 2011, 05:46:49 AM
 #12

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
What does 2,500,000 stand for?

marty.lee
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September 05, 2011, 05:47:36 AM
 #13

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty

Please, if you can spare a coin, donate to 18WcoktS5q35iBsQw9u48XCWfzdjzfHR9u

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marty.lee
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September 05, 2011, 05:50:10 AM
 #14

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
What does 2,500,000 stand for?
It is a control variable for highest difficulty that is possible for quite a while. It is like how the score at bitcoin.cz or whatever pool does score is calculated. I fixed some of that in my later equation.

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NothinG
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September 05, 2011, 05:50:53 AM
 #15

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty
Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation. Smiley

[Edit]:
Still need to figure out how to modify m.

marty.lee
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September 05, 2011, 05:59:25 AM
 #16

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty
Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation. Smiley

[Edit]:
Still need to figure out how to modify m.
Thank You so much. That means a lot. I will work on m.

Please, if you can spare a coin, donate to 18WcoktS5q35iBsQw9u48XCWfzdjzfHR9u

Donate to bitcoins for Haitian Wells
https://bitcointalk.org/index.php?topic=58776.0
marty.lee
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September 05, 2011, 06:34:23 AM
 #17

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty
Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation. Smiley

[Edit]:
Still need to figure out how to modify m.
Thank You so much. That means a lot. I will work on m.
After watching a few blocks pass and setting up a script to calculate the price with current data, I found that the price should go like this. Price jumps high or low at difficulty change, but lowers about $0.01 every 100 blocks, then jumps suddenly to a new price at the difficulty change. That is the theory based off 3 data points, and my intuition. So people would sell off bitcoins after the new difficulty if it was higher, otherwise, they would buy. Then as it nears the change of difficulty the exact opposite would occur. This provides a stable trading market for everyone!

Please, if you can spare a coin, donate to 18WcoktS5q35iBsQw9u48XCWfzdjzfHR9u

Donate to bitcoins for Haitian Wells
https://bitcointalk.org/index.php?topic=58776.0
NothinG
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September 05, 2011, 06:39:32 AM
 #18

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty
Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation. Smiley

[Edit]:
Still need to figure out how to modify m.
Thank You so much. That means a lot. I will work on m.
After watching a few blocks pass and setting up a script to calculate the price with current data, I found that the price should go like this. Price jumps high or low at difficulty change, but lowers about $0.01 every 100 blocks, then jumps suddenly to a new price at the difficulty change. That is the theory based off 3 data points, and my intuition. So people would sell off bitcoins after the new difficulty if it was higher, otherwise, they would buy. Then as it nears the change of difficulty the exact opposite would occur. This provides a stable trading market for everyone!
So, what's the new formula?

marty.lee
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September 05, 2011, 06:44:53 AM
 #19

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty
Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation. Smiley

[Edit]:
Still need to figure out how to modify m.
Thank You so much. That means a lot. I will work on m.
After watching a few blocks pass and setting up a script to calculate the price with current data, I found that the price should go like this. Price jumps high or low at difficulty change, but lowers about $0.01 every 100 blocks, then jumps suddenly to a new price at the difficulty change. That is the theory based off 3 data points, and my intuition. So people would sell off bitcoins after the new difficulty if it was higher, otherwise, they would buy. Then as it nears the change of difficulty the exact opposite would occur. This provides a stable trading market for everyone!
So, what's the new formula?
I will have within 48 hours of this post.

Please, if you can spare a coin, donate to 18WcoktS5q35iBsQw9u48XCWfzdjzfHR9u

Donate to bitcoins for Haitian Wells
https://bitcointalk.org/index.php?topic=58776.0
marty.lee
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September 05, 2011, 06:47:59 AM
 #20

BTC should be worth whatever the buyer/seller wants to trade them for.

I think that makes them more unstable then saying they're worth a fixed price.
As I said before.
(b*r)/(2500000-d) = (144004*50)/( 2500000- 1777774.4820015) = 9.9694622
That should be the current price, but it is slightly off
Last Price: 7.89859 High:8.467 Low: 7.8 Volume: 21694 Weighted Avg: 8.0884
about $2 high.
I'm sorry, but this equation can be infinity. Here is a new one that will keep the price under control
(144004*50)/((2500000*( 144004/140000))-1777774.4820015)
or
(b*r)/((c*(b/m))-d)
b = block
r = reward
c = control = 2500000
m = another control = 140000
d = difficulty
Give me a BTC Address, you may have just officially solved all of Bitcoin's price stability problems.
Just sent you a donation. Smiley

[Edit]:
Still need to figure out how to modify m.
Thank You so much. That means a lot. I will work on m.
After watching a few blocks pass and setting up a script to calculate the price with current data, I found that the price should go like this. Price jumps high or low at difficulty change, but lowers about $0.01 every 100 blocks, then jumps suddenly to a new price at the difficulty change. That is the theory based off 3 data points, and my intuition. So people would sell off bitcoins after the new difficulty if it was higher, otherwise, they would buy. Then as it nears the change of difficulty the exact opposite would occur. This provides a stable trading market for everyone!
So, what's the new formula?
Wait a minute. My brain is working. m=140000*(a/e)
a =average block generation time since last difficulty change in minutes out to 2 decimals
e = expected generation time in minutes = 10

Please, if you can spare a coin, donate to 18WcoktS5q35iBsQw9u48XCWfzdjzfHR9u

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https://bitcointalk.org/index.php?topic=58776.0
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