Speculation to currency rate

[Findeton]

A buyer gets his sallary in dollars/euros/whatever. Then he converts it to bitcoins. Then he buys something in bitcoins. Then the seller cashes out the bitcoins into dollars/whatever again.

This is a complete dollar -> bitcoin -> dollar cycle.

If this was the main use of bitcoins (for the time being, it isn't), speculation would be somewhat limited. It would also expand the number of people using bitcoins. Let's face it, bitcoin is just another currency in the world, a very small one so the main use, apart from speculation, will be something like the cycle I described.

I thinkwe should all create local groups and meet together to support our cause... by convincing local shops to accept bitcoins (and teaching them how to use them) and buying things on those local shops. Meetings would be in bars and restaurants that would accept bitcoins. We should all buy everyday things with bitcoins. If we are willing to buy, sellers will automatically follow.

I say we should start convincing sellers by trying to buy somewhat expensive things with bitcoins. For example if you want to buy a guitar, buy it with bitcoins.

Perhaps speculation will be a predominant factor in the bitcoin economy, but bitcoins won't become a real currency unless people use them to buy stuff. I say we go local.

[lonelyminer (Peter Šurda)]

The main issue that I see with going for the prohibition market is that this undermines the attempts of Bitcoin to establish itself in other markets. I'm not going as far as saying that you can't have both at the same time, but there is a certain interrelationship. A lot of people support the war on drugs and so do the legislators. If Bitcoin tries to position itself in the prohibition markets, these people will be less inclined to use it and even attempt legislative attacks. The legislative attacks might not succeed (particularly if the fiat currencies collapse, as Schlichter rightfully pointed out during the panel talk at the Prague conference), but it's something to consider.

I just have one more remark. Some people, such as Dellingshausen claim that the price of Bitcoin will drop if declared illegal. This is by no means certain. As any economist should tell you, the price of goods during prohibition changes depending on the elasticity of demand and the availability of substitutes. If the other payment methods are burdened by regulations as well (and we know they are), and people still want drugs (they most likely will), then the price of Bitcoin should rise.

[Findeton]

To be frank, and this will get me a LOT of sneering and bad attitudes...

Bitcoin needs to take the black market. Completely. One of the biggest (if not the biggest) trades globally is the drug trade. Now by 'drug trade' most people think of physical shipment, meeting dodgy people, handing over cash, getting unknown product. However, in the USA (I'm not American nor in the US, FWIW), the *prescription drug* market is a similarly huge trade.

And it's underground. Online pharmacies, etc. Anyone running their own email gets enough spam to know what most of them sell, but selling *prescription* versions of recreational drugs (painkillers, anxiolytics, stimulants, etc.) is a BIG business on the internet.

It's the middle class drug dealer network, basically. People want to pay conveniently and have pure, blister-pack drugs shipped in the mail to them - without a prescription.

This is illegal, but incredibly popular. For years, the trade has gone on using various methodologies to pay the vendors. Credit cards worked for a short while, then the big processors got shut down. Then chinese credit card processors stepped in, until a major one was shut down recently. The money-sending orgs like Western Union are massively used for this sort of trade, and as everyone knows, Western Union costs a fortune.

It's *big* business, and one seemingly ideally suited to Bitcoin. Yes, I'll get flamed for suggesting illegal use of the currency, but if you want it getting used widely and in quantity... it's manna from heaven for these guys AFAICT.

If anyone here uses internet pharmacies (legally or illegally) - I'd recommend asking them to accept BTC and telling them how to exchange the currencies as and when required. Yes, it's tantamount to money laundering but this depends on whether you view the USA drug laws as just or not... (this is for a different thread, of course).

Don't be paranoid, you won't get banned, Anyways I have to say that the black market has to be careful, as bitcoins are NOT anonymous.

And, btw, we the bitcoiners cannot visually support the bitcoin economy with your approach. But we can try to buy normal things in our local shops with bitcoins. So let's do it!

[farfiman]

^^ what I was getting at was that the 'illegal' online pharmacy business is BIG business, and piggybacks onto the *legal* online pharmacy business (normal non-prescription products, beauty products, general healthcare etc.).

For those using *illegal* internet pharmacies (and there will be a few of them here) - evangelising Bitcoin to the 'dodgy' web shop owners - all of which are struggling with payment methods due to a certain chinese credit card processor and the infrastructure required to make Western Union payments feasible (loads of runners, effectively) - *may* get the 'dodgy' web shops to happily accept Bitcoin.

Like local - but with a subsequent avalanche of spread from the dodgy, to the semi-legal, to the legal, and then you'll have people asking why Boots (UK), Walgreens (US), etc. don't accept Bitcoin... certainly feasible.

Maybe I need more pills. Heh.

Bitcoin is and will be used on the "darkside" whatever we do and I guess it can't hurt the cause.
But to encourage the use in that way or declaring it as "The currency of crime" ( as some would see it)
would just bring the authorities  might down on bitcoin as a whole in an attempt (although futile) to battle crime.
A while back there was an article on TV about "darknet" and they declared there that bitcoin was INVENTED just to
have a currency for all shady deals. We don't need that.

[molecular]

The main issue that I see with going for the prohibition market is that this undermines the attempts of Bitcoin to establish itself in other markets. I'm not going as far as saying that you can't have both at the same time, but there is a certain interrelationship. A lot of people support the war on drugs and so do the legislators. If Bitcoin tries to position itself in the prohibition markets, these people will be less inclined to use it and even attempt legislative attacks. The legislative attacks might not succeed (particularly if the fiat currencies collapse, as Schlichter rightfully pointed out during the panel talk at the Prague conference), but it's something to consider.

firstly, let me answer to catfish: you should not be ashamed for predicting and/or suggesting bitcoin conquer some illegal markets. You're not promoting breaking the law, so why should you get banned here? Even high profile politicians do this: http://falkvinge.net/2011/06/16/bitcoins-four-drivers-part-one-unlawful-trade/

lonelyminer: As you know, I have high respect for your opinions. I'm not sure about this one, though. I lean a little bit to the other side, thinking that bitcoin being used for unlawful trade will not by default have a negative impact on it's success (namely it's use in other, more legit markets).

Let's assume for a second that bitcoin is used widely in unlawfull black markets (drugs, botnets, services, human traficking, human organs, whatever sick shit you can think of). I'm assuming it already is being used in some of these, just not widely. Now the prohibition of use in other markets would have to take the way of either a) shaping public opinion negatively (smear campaign) or b) legal action.

b) will fail to take down the currency itself, of course, because bitcoin is specifically designed to withstand such attacks. I think it will also fail to make a big enough dent into legitimacy of "legal bitcoin use". I just cannot imagine "bitcoin being made completely illegal everywhere". This might be some sort of a gray area and this attack then becomes more like a), an attack on trust.

as for a), let me argue that we have seen this on a smaller scale already (remembers the congress member xzy talking about silkroad/bitcoin/(tor)). This was during the summer bubble time. Now one could argue that the slow steady decline of bitcoins price (an indicator for its success) is at least partly due to that negative press. I think, however, that the mybitcoin fiasko and gox hack (however unfair towards bitcoin itself) had a much greater share in the doomsday reporting by media. Did silkroad have negative impact on actual "bitcoin use in other markets"? I think you'd have a hard time arguing this.

So in summary I fail to fully see that use in unlawful markets would prevent bitcoins adoption in other markets. I'm not dismissing the reasoning, just leaning to the other side thinking: "noone cares USD cash is used for drug trade, why would anybody care in the bitcoin case, as long as it has relatively stable value". I for one would put much trust into bitcoins value if the mafia or any such "organization" used it for inter-familiy bookkeeping and/or store of wealth and/or trade and/or settlement of debt.

After all: Geld stinkt nicht. ("money doesn't smell")

EDIT: I do not promote illegal activity.

[molecular]

A while back there was an article on TV about "darknet" and they declared there that bitcoin was INVENTED just to
have a currency for all shady deals. We don't need that.

So what? A lot of cool, now-used-by-everyones-grandma technologies where matured by the filthy porn industry, right? Does grandma care when browsing youtube? No.

"If shady criminals can trust bitcoin, so can I". Criminals are careful people, at least the ones outside of jail.

EDIT: I do not promote illegal activity.

[bombshelterzero]

designed in 20 mins. I love the idea behind this and would love to start up a project with a few select individuals.

[Transisto]

Interesting discussion
I think Catfish was correct to "merely" insinuate his post could be flagged for deletion.

Some people here think of the Bitcoin economy as something of much greater importance than a simple replacement for fiat currencies.

We should all modulate our thinking so that bitcoin is being perceived as legal and a cause worth defending.
Unlike what most users of this forum think, Bitcoin is very young and extremely vulnerable.

These black usages are not desirable but will happen. For now, I would suggest moderators/owner do their best to state clearly not to promote illegal or borderline immoral stuff on this forum.

At this time, I would be very cautious with the "Any publicity is good publicity" adage.

[lonelyminer (Peter Šurda)]

lonelyminer: As you know, I have high respect for your opinions. I'm not sure about this one, though. I lean a little bit to the other side, thinking that bitcoin being used for unlawful trade will not by default have a negative impact on it's success (namely it's use in other, more legit markets).

Thank you molecular, the feeling is mutual.

However, I think I wasn't successful in explaining myself. I agree with everything you say. But my point is that a lot of people do not think logically and their opinions are rather formed by various emotions, dogmas and so on. These are the object of my objection. Not the rationally thinking guy that realises, to use an analogy, that "guns don't kill people, people kill people". A lot of people support policies even though they cannot defend them intellectually.

Even if you, for example, dislike the effects of drugs, prohibition is an unsuitable method to counter them. This is analysed for example by Mark Thornton in The Economics of Prohibition. To support prohibition due to not liking drugs is illogical. Nevertheless, considerable parts of the populace support drug prohibition.

I could go on about all kinds of other topics which are even more controversial. It's the irrational that I'm cautioning against.

Or to put it into other words, I'm not talking about economics, I'm talking about a marketing strategy.

[molecular]

However, I think I wasn't successful in explaining myself. I agree with everything you say. But my point is that a lot of people do not think logically and their opinions are rather formed by various emotions, dogmas and so on.

I keep forgetting to factor human psychology into my analyses. For example after the gox hack, I held on to my bitcoins, thinking: "Fundamentals still sound, these idiots just dont get it, bitcoin will come back, I stay long". Instead I should've thought: "These idiots will keep selling for a while, I better sell 50% and buy back in when the mood swings up again".

Trying to learn this lesson... still not sure of the impact to your argument, will need to rethink.

[lonelyminer (Peter Šurda)]

For example after the gox hack, I held on to my bitcoins, thinking: "Fundamentals still sound, these idiots just dont get it, bitcoin will come back, I stay long". Instead I should've thought: "These idiots will keep selling for a while, I better sell 50% and buy back in when the mood swings up again".

This is a good example. While I am not entirely sure the gox hack was the reason for the trend reversal, at least I agree that the argument makes sense.

[molecular]

For example after the gox hack, I held on to my bitcoins, thinking: "Fundamentals still sound, these idiots just dont get it, bitcoin will come back, I stay long". Instead I should've thought: "These idiots will keep selling for a while, I better sell 50% and buy back in when the mood swings up again".

This is a good example. While I am not entirely sure the gox hack was the reason for the trend reversal, at least I agree that the argument makes sense.

Yeah, it surely wasn't only the gox hack. the mybitcoin fiasco, people lossing money, malware showing up and bad press ("bitcoin is dead") in general. all the doomsayers. idiots in forums, it just drew the whole crowd down, friggin' lemmings jumping off cliff.

[Rassah]

I keep forgetting to factor human psychology into my analyses. For example after the gox hack, I held on to my bitcoins, thinking: "Fundamentals still sound, these idiots just dont get it, bitcoin will come back, I stay long". Instead I should've thought: "These idiots will keep selling for a while, I better sell 50% and buy back in when the mood swings up again".

Problem is that no one knows when the mood changes. Was the rise from $25 to $30 permanent? Was the drop from $30 to $20 a trend or temporary setback? Was the bottom at $17, $12, $10, $5, $3, or $2.50? Is the rise we are seeing now a rebound, or another short bubble that's going to burst in a week or two? I don't think anyone really knows or could've correctly predicted that, and we only now know this after the fact. My thought has been, and still is, "Fundamentals are sound, these idiots just don't get it, and although it sucks that I've lost a lot on my initial investment, they're just giving me more time to buy cheap as an 'early adopter'." So I've been continuing to buy every few weeks, regardless if the price is $17 or $2.50, though another reason was my fear of missing a huge rebound that no one predicted. Another benefit is that buying low averages out my loss, and has brought my break even amount from $18.50 to just under$10.
Remember when the economy crashed in 2008? A LOT of people freaked out and moved to bonds when their portfolios lost half their value. They locked in their losses and only made back a pittance on small bond returns, while stocks rallied back up later that spring, restoring most of the losses of those who kept holding (this was often in the news, about skiddish people complaining about losing their retirement savings). Had people sold 50% of their bitcoin after the decline, they may have lost the same way, and I suspect there a few who bought for a higher amount and freaked out when the price dropped to $2.50, thinking it'll go under $1 and converting to USD, only to lock in their losses and miss the jump to $6.50.

[molecular]

Remember when the economy crashed in 2008? A LOT of people freaked out and moved to bonds when their portfolios lost half their value. They locked in their losses and only made back a pittance on small bond returns, ...

exactly, you don't loose anything when the value of a commodity you hold on the exchanges drops, you loose when you sell them at that low price.

"Hold on to your hat and bitcoins and prepare for a wild ride" (something I might have heard back in summer), might turn out to not have been such a bad idea in the end.