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Author Topic: The REAL reason price went down and why it will go up  (Read 4404 times)
Technomage
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September 07, 2011, 12:32:18 PM
 #1

We've had a large number of threads like this and now it's my turn. Today I ran into an article that responded to the big Krugman blog and that response was pretty good: http://www.bitcoinmoney.com/post/9913036774/paul-krugman-bitcoin-op-ed

Now the article itself was nice but there was a link to a graph that really made me understand that the economic activity in the Bitcoin world is what truly drives the price. Look at this graph:

http://pi.uk.com/bitcoin/charts/n-transactions

Now if we compare that chart to the price chart, the correlation is very strong. The economic activity (number of transactions) has slowed down, taking the price down as well.

Of course there's still no sign of a change in the trend of lowering transaction amounts but I think it's not even a question of debate that we're soon closing in on the point where the transaction count will level off and probably start rising again.

My main point is that with the current amount of transactions, and looking at the price correlations, the price can't possibly be lower than $6, not as a stable price at least. The transactions need to come down way more. And my prediction is that the transactions will level off very soon.

I've also heard some arguments that this bubble has taken "too long" to level off but that's completely understandable because it's the biggest bubble in Bitcoin history. But it's very close to leveling off at this point.

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memvola
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September 07, 2011, 01:05:35 PM
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This was the best argument so far, and thanks for the link to that useful site. You persuaded me to resume buying and spending. Probably won't buy more than I spend though, just in case. Smiley
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September 07, 2011, 01:07:40 PM
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My main point is that with the current amount of transactions, and looking at the price correlations, the price can't possibly be lower than $6, not as a stable price at least.

Aaaaaahaha! Cheesy
I hope I don't forget to quote you on that when we level off at $5, $3 and $1!

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Technomage
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September 07, 2011, 01:32:12 PM
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My main point is that with the current amount of transactions, and looking at the price correlations, the price can't possibly be lower than $6, not as a stable price at least.
Aaaaaahaha! Cheesy
I hope I don't forget to quote you on that when we level off at $5, $3 and $1!
Well, I hope you know how to read. I said current amount of transactions. If the transaction count continues to go down to levels we had 6 months ago, then the price will go down to the numbers you're describing. But I find that highly unlikely, absolutely nothing from historic trends or current trends suggest such a decline.

What we're seeing is a long level off from the biggest bubble in Bitcoin history, but after that is over the price will stabilize and begin to rise again. Looking at the transaction counts and thinking about it, I feel we truly haven't even started yet. Those are some small numbers in my opinion. Within 6 months we might have a transaction count that is double the summer peak and if the correlation continues, the price will be at an all-time high.

That's speculation though, where the transaction count goes depends on the efforts of Bitcoin-enthusiasts to develop and market the Bitcoin economy.

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September 07, 2011, 01:40:11 PM
 #5

My main point is that with the current amount of transactions, and looking at the price correlations, the price can't possibly be lower than $6, not as a stable price at least.
Aaaaaahaha! Cheesy
I hope I don't forget to quote you on that when we level off at $5, $3 and $1!
Well, I hope you know how to read. I said current amount of transactions. If the transaction count continues to go down to levels we had 6 months ago, then the price will go down to the numbers you're describing. But I find that highly unlikely, absolutely nothing from historic trends or current trends suggest such a decline.

I oh I know how to read. And I understood that you think that if transactions don't go down, the price won't go down. And I think you are wrong. The price will just keep going down no matter what.

I will remind you when we level out below 6 for the first time, ok?

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September 07, 2011, 01:44:44 PM
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I oh I know how to read. And I understood that you think that if transactions don't go down, the price won't go down. And I think you are wrong. The price will just keep going down no matter what.
Well this pretty much proves that you don't have any real arguments behind the doomsday talk which justifies me calling you a troll from this point on.

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zby
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September 07, 2011, 01:48:46 PM
 #7

All these transactions are just people speculating, people buying/selling stuff with bitcoins as medium is probably just a small promile - so the correlation is not that interesting - it does not give you any lead time.
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September 07, 2011, 02:19:03 PM
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I oh I know how to read. And I understood that you think that if transactions don't go down, the price won't go down. And I think you are wrong. The price will just keep going down no matter what.
Well this pretty much proves that you don't have any real arguments behind the doomsday talk which justifies me calling you a troll from this point on.

Ah, the infamous "you're a troll argument". Strong argument!

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September 07, 2011, 02:46:19 PM
 #9

Bitcoin: where correlation DOES = causation...

Next up: P=NP

stay tuned.
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September 07, 2011, 02:46:37 PM
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Ah, the infamous "you're a troll argument". Strong argument!

He's right, you ARE a troll, so, the argument is pretty strong, even if you weren't trolling in this occasion.

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September 07, 2011, 03:27:59 PM
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I must admit that this is an interesting argument, and the first one I've seen that actually attempts to use real economic principles to support a high bitcoin price.  I still disagree though, the bitcoin economy is still tiny compared to the USD or the Euro, and should have a lower price as a result.
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September 07, 2011, 03:29:20 PM
 #12

I must admit that this is an interesting argument, and the first one I've seen that actually attempts to use real economic principles to support a high bitcoin price.  I still disagree though, the bitcoin economy is still tiny compared to the USD or the Euro, and should have a lower price as a result.
So if there are 21 Bitcoins (highly divisible of course) in total for us, the nominal exchange rate still should not exceed those of major currencies?

 Huh
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September 07, 2011, 03:42:22 PM
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I must admit that this is an interesting argument, and the first one I've seen that actually attempts to use real economic principles to support a high bitcoin price.  I still disagree though, the bitcoin economy is still tiny compared to the USD or the Euro, and should have a lower price as a result.

So [Company A] with a market cap of $1M, say, has 1M total shares, all privately owned. What is the value per share?

[Company B], has a market cap of $1k, has 10 shares, all priveately owned. What is the value per share?

Company A is the USD, Company B is BTC.

-Jix
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September 07, 2011, 03:48:04 PM
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I must admit that this is an interesting argument, and the first one I've seen that actually attempts to use real economic principles to support a high bitcoin price.  I still disagree though, the bitcoin economy is still tiny compared to the USD or the Euro, and should have a lower price as a result.
So if there are 21 Bitcoins (highly divisible of course) in total for us, the nominal exchange rate still should not exceed those of major currencies?

 Huh
Not exactly what I was trying to say.  What I was saying is that without a larger economy, and lower inflation, we shouldn't expect that the bitcoin would be extremely high priced.  Currency prices are driven primarily by imports and exports.  The primary import for the bitcoin economy is electricity, and compared to that import, the exports are very small, therefore we should see a decrease in the bitcoin until exports increase to match the import of electricity.

Added:
Or we should see the import of electricity to decline to match the export of goods (which is much more likely to happen).
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September 07, 2011, 03:49:20 PM
 #15

I must admit that this is an interesting argument, and the first one I've seen that actually attempts to use real economic principles to support a high bitcoin price.  I still disagree though, the bitcoin economy is still tiny compared to the USD or the Euro, and should have a lower price as a result.

So [Company A] with a market cap of $1M, say, has 1M total shares, all privately owned. What is the value per share?

[Company B], has a market cap of $1k, has 10 shares, all priveately owned. What is the value per share?

Company A is the USD, Company B is BTC.

-Jix
This is not exactly how macro-economics work, unfortunately.
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September 07, 2011, 04:15:16 PM
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This is not exactly how macro-economics work, unfortunately.

No, but it is a sufficient explanation for why the value of a single bitcoin is worth more than that of a single dollar.

-Jix
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September 08, 2011, 01:29:24 PM
 #17

Nice try OP, but it seems the graph everyone is creaming over lags the actual price cahnge by weeks.
So it seems the interest in bitcoin is very much related to the price.
The ammount of transactions is a consequence of the price, not the other way around.
At least, thats what i see.
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September 09, 2011, 06:15:48 AM
 #18

My main point is that with the current amount of transactions, and looking at the price correlations, the price can't possibly be lower than $6, not as a stable price at least. The transactions need to come down way more. And my prediction is that the transactions will level off very soon.

Just in here to laugh at you some more. $6.0 at the moment.... So it can't POSSIBLY get lower now, right? RIGHT!? Cheesy Cheesy

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September 09, 2011, 06:53:32 AM
 #19

Come one traders, take a lick of that $5.95 bid wall.  You know you want to.  Tastes delicious.

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September 09, 2011, 07:19:53 AM
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Come one traders, take a lick of that $5.95 bid wall.  You know you want to.  Tastes delicious.

That's the wall that belongs to the one rich guy called The Manipulator.  When he wakes up Friday morning, he will remove it.

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