Too many new coins, not enough new Bitcoiners

[slothbag]

Google trends is showing search interest in Bitcoins dropping back to pre $1usd levels, bitcoinstatus charts are showing a gradual decline in users running the bitcoin client.  New posts from the 3 main Bitcoin forums seems to be slowing down, at one stage it was difficult to keep up with one forum, now all three can have no new interesting posts in 24 hours.

Seems to me as the price drops lower and lower people are walking away from bitcoin, and some people are loosing interest.  All that remains are the true Bitcoin supporters that believe it has a future as a medium of exchange.

This is all fine and good with me, a high price is not that important and the get rich quick types can go find something else to play with.  But whats going to happen with the 7200btc per day, or $35,000usd of money entering the economy? Thats still $1m usd (at current prices) that needs to be absorbed per month.

I'm sure like most other longterm Bitcoin supporters, we've probably invested just about all we are willing to invest at this stage, so no new money there..

Let's say we get $1000-$5000 dollars PER DAY (roughly $30k-150k a month) from new Bitcoin enthusiasts who just found out about or decided to invest some cash.. that works out to about 1btc = 0.13-0.70usd.  Obviously some miners will hold onto their newly mined coins, so that estimate will be a little higher.

Still got room to fall? I think so.

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[BitcoinPorn]

Interesting, I see the big picture as, security first, less economy and mining talk.

[the founder]

slothbag,

 I've been bitching about the inflation rate and printing off bitcoins at a rate that would even make the Federal Reserve squirm...  you'll be preaching to deaf ears..    people here won't listen to that type of logic.

[Gabi]

Well there will never be more than 21 millions of bitcoins, so where is the problem?

[evoorhees]

slothbag,

 I've been bitching about the inflation rate and printing off bitcoins at a rate that would even make the Federal Reserve squirm...  you'll be preaching to deaf ears..    people here won't listen to that type of logic.

And you've still never addressed the following - the money printing rate was the same (actually higher in percentage terms) when bitcoins were priced at $0.01 and at $30.  Of all the variables in the Bitcoin economy, the printing rate is NOT one of them. It's perfectly steady, yet you seem obsessed with attributing a declining market price on that aspect. It's as if you're inferring that Bitcoin has lost its way because we're now printing so much money    

If and when the price rises again, people will start complaining instead about bitcoin being "deflationary" - not printing fast enough. Price rising? "Bitcion will fail cause it's deflationary."  Price falling? "Bitcoin is doomed because we're printing so much money!"

While I love a skyrocketing price as much as anyone, for those who understand the true value of these coins, this falling price is a blessing. Be greedy when others are fearful (although I hate quoting the socialist, hypocritical Warren Buffett).

[jjiimm_64]

We are all owners of a screw driver with a PI symbol head convincing people to use PI shaped screws.

that is a Great analogy.


"computer, solve PI"  


I am glad to see the price of btc's come down, gives me a chance to mine more as I entered a little late to the party.  

I do not think that the price will drop below the avg cost of electricity to mine them...  if it does..  well we can talk about that then.

[the founder]

slothbag,

 I've been bitching about the inflation rate and printing off bitcoins at a rate that would even make the Federal Reserve squirm...  you'll be preaching to deaf ears..    people here won't listen to that type of logic.

And you've still never addressed the following - the money printing rate was the same (actually higher in percentage terms) when bitcoins were priced at $0.01 and at $30.  Of all the variables in the Bitcoin economy, the printing rate is NOT one of them. It's perfectly steady, yet you seem obsessed with attributing a declining market price on that aspect. It's as if you're inferring that Bitcoin has lost its way because we're now printing so much money    

If and when the price rises again, people will start complaining instead about bitcoin being "deflationary" - not printing fast enough. Price rising? "Bitcion will fail cause it's deflationary."  Price falling? "Bitcoin is doomed because we're printing so much money!"

While I love a skyrocketing price as much as anyone, for those who understand the true value of these coins, this falling price is a blessing. Be greedy when others are fearful (although I hate quoting the socialist, hypocritical Warren Buffett).

LOL!  I knew you would be the one to reply to this one

I did address it...  the printing money rate isn't the same as the adoption rate,  not even close.

picture this, because this is what is happening (i'm going to use simple figures rather than the real ones for simplicity sake).

-------
January - 5 bitcoins printed  -  10 people enter market each wanting 1 bitcoin  - price rises
February - 5 bitcoins printed - 11 people enter market each wanting 1 bitcoin - prices rise faster
March  - 5 bitcoins printed - 20 people enter market each wanting 1 bitcoin - prices skyrocket
April - 5 bitcoins printed - 4 people enter market wanting 1 bitcoin - prices tank
May - 5 bitcoins printed - 3 people enter market wanting 1 bitcoin - prices tank
Jun - 5 bitcoins printed - 2 people enter market wanting 1 bitcoin - prices tank.
------
July spot price -  5 dollars

If it was able to be adjusted

-----------------
January - 5 bitcoins printed  -  10 people enter market each wanting 1 bitcoin  - price rises
February - 5 bitcoins printed - 11 people enter market each wanting 1 bitcoin - prices rise faster
March  - 5 bitcoins printed - 20 people enter market each wanting 1 bitcoin - prices skyrocket
April - 1 bitcoin printed - 4 people enter market wanting 1 bitcoin - prices skyrocket
May - 5 bitcoins printed - 30 people enter market wanting 1 bitcoin - prices skyrocket
Jun - 5 bitcoins printed - 45 people enter market wanting 1 bitcoin - prices skyrocket
------------------
July spot price 50 dollars.


In the above,  by taking action for just one month (April)  and reducing the amount printed it changes the whole dynamics of it...  the end result would still be 21 million coins at the end,  just stabilize it to match demand and keep the asset price growing...  because when people see the price booming more start entering... hence increasing demand.

[evoorhees]

slothbag,

 I've been bitching about the inflation rate and printing off bitcoins at a rate that would even make the Federal Reserve squirm...  you'll be preaching to deaf ears..    people here won't listen to that type of logic.

And you've still never addressed the following - the money printing rate was the same (actually higher in percentage terms) when bitcoins were priced at $0.01 and at $30.  Of all the variables in the Bitcoin economy, the printing rate is NOT one of them. It's perfectly steady, yet you seem obsessed with attributing a declining market price on that aspect. It's as if you're inferring that Bitcoin has lost its way because we're now printing so much money    

If and when the price rises again, people will start complaining instead about bitcoin being "deflationary" - not printing fast enough. Price rising? "Bitcion will fail cause it's deflationary."  Price falling? "Bitcoin is doomed because we're printing so much money!"

While I love a skyrocketing price as much as anyone, for those who understand the true value of these coins, this falling price is a blessing. Be greedy when others are fearful (although I hate quoting the socialist, hypocritical Warren Buffett).

LOL!  I knew you would be the one to reply to this one

I did address it...  the printing money rate isn't the same as the adoption rate,  not even close.

picture this, because this is what is happening (i'm going to use simple figures rather than the real ones for simplicity sake).

-------
January - 5 bitcoins printed  -  10 people enter market each wanting 1 bitcoin  - price rises
February - 5 bitcoins printed - 11 people enter market each wanting 1 bitcoin - prices rise faster
March  - 5 bitcoins printed - 20 people enter market each wanting 1 bitcoin - prices skyrocket
April - 5 bitcoins printed - 4 people enter market wanting 1 bitcoin - prices tank
May - 5 bitcoins printed - 3 people enter market wanting 1 bitcoin - prices tank
Jun - 5 bitcoins printed - 2 people enter market wanting 1 bitcoin - prices tank.
------
July spot price -  5 dollars

If it was able to be adjusted

-----------------
January - 5 bitcoins printed  -  10 people enter market each wanting 1 bitcoin  - price rises
February - 5 bitcoins printed - 11 people enter market each wanting 1 bitcoin - prices rise faster
March  - 5 bitcoins printed - 20 people enter market each wanting 1 bitcoin - prices skyrocket
April - 1 bitcoin printed - 4 people enter market wanting 1 bitcoin - prices skyrocket
May - 5 bitcoins printed - 30 people enter market wanting 1 bitcoin - prices skyrocket
Jun - 5 bitcoins printed - 45 people enter market wanting 1 bitcoin - prices skyrocket
------------------
July spot price 50 dollars.


In the above,  by taking action for just one month (April)  and reducing the amount printed it changes the whole dynamics of it...  the end result would still be 21 million coins at the end,  just stabilize it to match demand and keep the asset price growing...  because when people see the price booming more start entering... hence increasing demand.

That's very troubling sentiment... manipulating the money supply is precisely the reason fiat currencies are destined for failure. There is no legitimate reason to manipulate the price higher and higher. It may provide short term happiness to those holding coins, but it distorts the market signals that free-floating prices provide. Such manipulation would be the end of Bitcoin's value.

The movement of prices are not arbitrary. They allocate and coordinate how resources are utilized. If the supply rate of Bitcoins were restricted in order to assure a constantly rising price, you'd instantly create a speculative bubble, for every investor would buy as many coins as possible, knowing the price will be "managed" upward. The price would skyrocket - but to what end? Are Bitcoins worth $50 right now? Or $1,000?  None of us know. And when that bubble you produce pops, the devastation will be ruinous.

The ability of the price to fall is JUST AS important as the ability of it to rise. Tinker with it one way or the other, and you distort human behavior. If you think you're wise enough to distort it in a positive way, then you're suffering from the same affliction and hubris of all fiat central bankers - believing they are smart enough to know the "proper" market price of any asset. It is folly. And it's precisely because so many fall for the myths of central planning that Bitcoin is so necessary, and so valuable.

The day the money supply is tinkered with (including the derivative rate of such supply), I'm gone. I'll peace out like the Lorax.

[wareen]

Who decides when/how to change the block reward? The devs? Mt. Gox? The miners? The speculators? The "manipulator"?
No matter how you craft this system - you will always piss somebody off, resulting in a blockchain split, eventually ruining Bitcoin for all of us.

Bitcoin is a community contract - everybody knows the rules beforehand and everybody implicitly agrees to follow them. If they were different; allowing for some more or less arbitrary intervention at the core system of money generation then you'd deprive Bitcoin of one of its greatest advantages: the fact that nobody can really mess with it.

Monetary policy is a damn hard thing to get right - have a look at governments around the world to see how well they are doing with that. Your thoughts have some merit, but I think you hugely underestimate the greater consequences of breaching the Bitcoin contract.

[nmat]

The coin production will halve next year. Just relax and wait. Inflation will go away eventually...

[Steve]

That's very troubling sentiment... manipulating the money supply is precisely the reason fiat currencies are destined for failure. There is no legitimate reason to manipulate the price higher and higher. It may provide short term happiness to those holding coins, but it distorts the market signals that free-floating prices provide. Such manipulation would be the end of Bitcoin's value.

The movement of prices are not arbitrary. They allocate and coordinate how resources are utilized. If the supply rate of Bitcoins were restricted in order to assure a constantly rising price, you'd instantly create a speculative bubble, for every investor would buy as many coins as possible, knowing the price will be "managed" upward. The price would skyrocket - but to what end? Are Bitcoins worth $50 right now? Or $1,000?  None of us know. And when that bubble you produce pops, the devastation will be ruinous.

The ability of the price to fall is JUST AS important as the ability of it to rise. Tinker with it one way or the other, and you distort human behavior. If you think you're wise enough to distort it in a positive way, then you're suffering from the same affliction and hubris of all fiat central bankers - believing they are smart enough to know the "proper" market price of any asset. It is folly. And it's precisely because so many fall for the myths of central planning that Bitcoin is so necessary, and so valuable.

The day the money supply is tinkered with (including the derivative rate of such supply), I'm gone. I'll peace out like the Lorax.

+1 Well said Erik.  I don't understand why this is such a hard concept for some people to grasp.

[FAtlas]

More people are leaving the market than are entering while the supply slowly inflates.  The price will keep relatively steady around the current number for a little while longer.  Then one day it will plunge in a selloff then fluctuate for a little while before stabilizing at a lower number.  Rinse and repeat until there are three bitcoiners left at $0.10 a coin, circlejerking each other about how "It's really starting to catch on!" while the constant hum of a white noise mining machine gnaws at the edge of their perception.  They justify the electricity cost by claiming that it's heating their homes during the winter, but deep down they know.  They Know

[allten]

slothbag,

 I've been bitching about the inflation rate and printing off bitcoins at a rate that would even make the Federal Reserve squirm...  you'll be preaching to deaf ears..    people here won't listen to that type of logic.

The market is mature enough to short. I hope you are "put"ing you money where your mouth is.
You would in essence be doing your part to help the bitcoin economy discover the true price even faster (assuming you are correct) which would be very good thing....

[the founder]

I'm not shorting,  I believe in it long term,  just we have to wait till next year at 25 reward to raise it rather than it being done yesterday,  where it would of helped long term.

[tetra4c]

Let's hope the technical analysis at http://blog.bitcoinwatch.com/ is right!

One observation - there is a learning curve for using, believing and trusting in Bitcoin. After this last cycle, anyone I talk too *at least* knows about Bitcoin. That's got to be a positive. Eventually, they should become more comfortable using it (hopefully).

Now if people would stop selling their coins the price could actually go up a bit or two!  

[tvbcof]

More people are leaving the market than are entering while the supply slowly inflates.  The price will keep relatively steady around the current number for a little while longer.  Then one day it will plunge in a selloff then fluctuate for a little while before stabilizing at a lower number.  Rinse and repeat until there are three bitcoiners left at $0.10 a coin, circlejerking each other about how "It's really starting to catch on!" while the constant hum of a white noise mining machine gnaws at the edge of their perception.  They justify the electricity cost by claiming that it's heating their homes during the winter, but deep down they know.  They Know

An alternate hypothesis is that the value does something along the lines you've outlined, but the system is used for the things it is currently good for.  Like providing support organizations like wikileaks or occuplywallstreet who have fallen out of favor with the large financial institutions and governments (which are increasingly indistinguishable.)  Over this time the system in increasingly analyzed and hardened.  Also, however, over this time the system is also analyzed for zero-day attacks and media prep work is done.

Then one day a big country pulls an Argentina (in the same way B7 pulled a MyBitcoin) and what remains of the middle class find their ATM's no longer work right.  If that happens, and it does not strike me as particularly far-fetched given the difficulty maintaining stability in the 'official' monetary systems these days, it will be very interesting at least and possibly very lucrative to have some BTC squirreled away.  It's worth putting a bet on...to me at least.

[Mageant]

I don't mind lower prices, at least I can buy more then.
It would be fun for me to have early adopter prices since I missed out on them.
But probably I won't get so lucky.
 

[FreeTrade]

Slothbag makes a good point - BTC prices are very well correlated with Google Trends - here's the comparison which I present for you on account of Slothbag being too slothful to do it himself.




Clearly more interest in Bitcoin equates to higher USD prices. The reverse doesn't quite hold true - high prices and dramatic price changes lead to more stories, and thus more interest. Low prices not so much.

Some advocates will tell you that Bitcoin is a currency and so stable prices are important to encourage merchants to price their goods in Bitcoin.

That's tosh. No-one in their right mind would price their goods in BTC. Bitcoin is a method of payment - it doesn't matter what the price of BTC is as long as there is convertibility - easy convertibility is the important factor, not stable exchange rates.

[2112]

until there are three bitcoiners left at $0.10 a coin, circlejerking each other about how "It's really starting to catch on!"

I'm thinking that there will be whole temples of bitcoiners using e-meters to discover the "bitcoin-suppresive people" and "operating crypto-thetans". The bitcoinology e-meters will be made by Cassasius out of refurbished VeriFone Vx570 payment terminals.

https://en.bitcoin.it/wiki/Casascius_Bitcoin_POS_system

By that time he will stop accepting bitcoin and only accept FIAT as a part of Purification Rundown.

http://en.wikipedia.org/wiki/Purification_Rundown

[allten]

I'm not shorting,  I believe in it long term,  just we have to wait till next year at 25 reward to raise it rather than it being done yesterday,  where it would of helped long term.

I think your view on shorting is misplaced.
I am extremely Bullish on Bitcoin technology and the value of bitcoins long term; however, if the market value is clearly out of line (high or low) then I feel the duty to put it in place by shorting or buying. Shorting doesn't have to equate with pessimism or negativity. IMO, The success of Bitcoin is not its price, but would be better served to achieve its true market value at a much quicker pace.

What price do you speculate would be able to handle the slow down in adoption rate + current money injection rate?
For me, (without getting into detail) it should be stable between $3 and $4 dollars for the next several months.
I don't have the power to force it there, but I can place my vote and in turn do the market a favor by speeding up price discovery (assuming I'm right).

Seriously, you should provide a FC account option to lend money to reputable exchanges that could use the liquidity to short the market.
The more exchanges that have this option the better. Shorting is a very positive thing for a currency.