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Author Topic: somebody please just set the minimum price - it's so easy  (Read 5391 times)
the founder
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October 17, 2011, 04:30:36 PM
 #61

I just don't see how someone can profit from backing them....  if you can find out a valid way to do it... then I can imagine it working.. but until then it's a pipe dream.


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October 17, 2011, 04:50:02 PM
 #62

so I see the question "why" and "how"

Why would anybody do it? I think it's pretty clear. If you have  100 000 BTC on hands (and yes, some people do), you are  interested in their price to grow. If you have zero BTC and consider starting using them for you business, you are worried that their price may drop to $0.0001 next week.   The 100000 BTC guy can attract 0 BTC guys by guaranteeing that the price will never go below (say) $1 (or $0.1). This will help expand the economy and consequently bring the price up.

How? I don't think it's difficult, really. Some ways have already been mentioned in this thread, but on a high level having some reputation and backing your "guarantee" by some legal statement is the way to go.

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October 17, 2011, 05:09:17 PM
 #63

so I see the question "why" and "how"

Why would anybody do it? I think it's pretty clear. If you have  100 000 BTC on hands (and yes, some people do), you are  interested in their price to grow. If you have zero BTC and consider starting using them for you business, you are worried that their price may drop to $0.0001 next week.   The 100000 BTC guy can attract 0 BTC guys by guaranteeing that the price will never go below (say) $1 (or $0.1). This will help expand the economy and consequently bring the price up.

How? I don't think it's difficult, really. Some ways have already been mentioned in this thread, but on a high level having some reputation and backing your "guarantee" by some legal statement is the way to go.



I don't think the problem is the guy holding 100,000 bitcoins,  the problem is the guy holding $21,000,000 USD (currently $7.5 million) to state that he will support the price at 1 dollar per BTC.

In order to support the price you need the dollars to support it with.   I personally don't have 21 million USD in my pocket to pay everyone 1 dollar per BTC.



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trout
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October 17, 2011, 05:33:16 PM
 #64

I don't think the problem is the guy holding 100,000 bitcoins,  the problem is the guy holding $21,000,000 USD (currently $7.5 million) to state that he will support the price at 1 dollar per BTC.


indeed, a guy with 100 000 BTC is not a problem, but a (potential) solution:  he's interested in the success of BTC. I think there are enough people who have a lot of BTC and have already made enough USD with them to be able to support bitcoin in the described way.

How much is needed for that? It's not 21 mil$, it's less. To begin with, in the next couple of years there will not be more than 11 mil bitcoins, so to guarantee the price at $1 for a couple of years you need at most that much. And then, it doesn't have to be 1$ per coin. Already $0.1 and even $0.01 per coin means some considerable stability.
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October 18, 2011, 12:56:03 AM
 #65

One thing central banks do is contol the rate of inflation by manipulating interest rates. They can print more money to raise inflation, but they can't really recall currency in circulation to lower inflation.

With bitcoin, it is possible for a central bank or cartel of central banks to control the bitcoin money supply. The important thing to understand is that stored bitcoins are indistinguishable from lost bitcoins. Bitcoins only really have value when they are spent. This means that the Central Banks can buy bitcoin when they want to raise the price, and sell bitcoin when they want to lower the price. Through this process, they are able to control the rate of deflation up until they run out of coins to sell (run-away deflation).

I didn't read the rest of your proposal because the last thing I want is for a central bank to frak up Bitcon but you are aware central banks currently do exactly what you outlined in the second paragraph (something you think is impossible) in fiat currencies.

For example the Federal Reserve can increase the money supply by printing money and then using that to buy treasury bills.  Since as you indicated something out of circulation is just as good as destroyed this in effect generates money from nothing and destroys a treasury bill (from the viewpoint of the economy outside the Fed's balance sheet).

To do the reverse the Fed sells Treasuries from its balance sheet and hold dollars.  Technically since it can create infinite amount of dollars at will on its balance sheet it doesn't hold them it simply removes them from the economy.  The supply of debt grows raising interest rates and the monetary supply shrinks raising the value of the dollar.
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October 18, 2011, 02:18:11 AM
 #66

How much is needed for that? It's not 21 mil$, it's less. To begin with, in the next couple of years there will not be more than 11 mil bitcoins, so to guarantee the price at $1 for a couple of years you need at most that much. And then, it doesn't have to be 1$ per coin. Already $0.1 and even $0.01 per coin means some considerable stability.

Alright here, I will personally guarantee that I will buy every last bitcoin for $21 for all ~21m. I am hereby guaranteeing the price will not drop below $0.0000001 per Bitcoin, or $1/MBTC.

Do not underestimate me as I have the economic power and desire necessary to guarantee a $7.48 market cap for the entire Bitcoin economy for the next month.

Feel better?

^_^
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October 18, 2011, 04:19:14 AM
 #67

One thing central banks do is contol the rate of inflation by manipulating interest rates. They can print more money to raise inflation, but they can't really recall currency in circulation to lower inflation.

...

I didn't read the rest of your proposal because the last thing I want is for a central bank to frak up Bitcon but you are aware central banks currently do exactly what you outlined in the second paragraph (something you think is impossible) in fiat currencies.

I removed the first line from my post because it was in error.

I was essentially advocating trading bots that allow wide, but tweakable price swings (with a year-long time-frame in mind) . If most bitcoin holders do the same thing, volatility should be reduced.

The point of trying to enforce a deflation target is that rapid climbs in price lead to bubbles, and make bitcoin look more like a ponzi scheme (even though it is not). If large bitcoin holders simply strategicly release coins when the price says there is demand, wild swings can be avoided. Conversely, crashes represent an opportunity to buy back in cheap, while at the same time supporting the price.

Didn't the bold "Decentralized Central Banking Proposal" hint my choice of words was deliberately provocative? My proposal combines the role of a central bank with the role of a free market.

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October 18, 2011, 04:25:09 AM
 #68

100+ years of central banking has taught us the folly of trying to control markets.  Yet still we try. No thanks.

If federal reserve with infinite liquidity can't keep the dollar stable I doubt anything can keep bitcoin stable and trying brings in bankers, and manipulators, and people pushing agendas (some will want BTC higher, some lower).  Sorry.  No thanks.
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October 18, 2011, 04:36:53 AM
 #69

I think part of my point is that the manipulators are there anyway. We (as in bitcoin holders, which I am not yet one) might as well set a soft floor and ceiling.

If the price really wants to keep climbing even after new old coins are put back in circulation, there is not much anybody can do to stop it. However, if the price spike is simply caused by a surge of interest after a news article or something similar, there is no need for the price to spike dramatically. Similarly, if Bitcoins really are worthless, any buy walls proping up the price will be pointless. However, filtering out flash crashes may be useful.

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October 18, 2011, 04:40:19 AM
 #70

I think part of my point is that the manipulators are there anyway. We (as in bitcoin holders, which I am not yet one) might as well set a soft floor and ceiling.

If the price really wants to keep climbing even after new old coins are put back in circulation, there is not much anybody can do to stop it. However, if the price spike is simply caused by a surge of interest after a news article or something similar, there is no need for the price to spike dramatically. Similarly, if Bitcoins really are worthless, any buy walls proping up the price will be pointless. However, filtering out flash crashes may be useful.


Are you inferring we use the R-word to stop swings? Isn't that bannable here?
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October 18, 2011, 05:04:07 AM
 #71

Are you inferring we use the R-word to stop swings? Isn't that bannable here?

If you mean regulation, no. Regulation is the end-result (not the cause).

I am advocating a cartel of bitcoin holders willing to risk token ammounts of fiat and bitcoin in order to absorb wild swings in the price of bitcoin. For the most part, the day-to-day swings should be left alone for day traders to play with.

The problem is that the day-traders don't plan for the long-term. I outlined a strategy that allows the people that really want to buy and hold to encourage more predictable growth. For the start-up phase, the target may be to keep anual growth between 0 and 10,000%. After the block-reward drops, it may be prudent to half the growth target as well, say between 0 and 5000% anually.

Anual growth of 1000% or more is stupidly high. I just don't think it would be sustainable. Since I don't expect the weighted average price to rise more than that much per year, I would set my buy and sell walls accordingly. As Death and Taxes pointed out, I have no way of enforcing that expectation. However, I think bitcoin adoption would be encouraged if wild price swings were avoided.

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