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Author Topic: questioning BTCs  (Read 1792 times)
jaybny
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May 05, 2011, 03:19:16 AM
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OK.. love the idea and own a bunch (as a hedge against hyperinflation of fiat currencies)

but I am now questioning the viability of BTC as a currency.

Say I have a website that sells widgets, and ships anywhere in the US. I accept USD and BTC. How would I price the widget in BTC? The price in USD can be found in Amazon etc.. so I go to mtgox and price the widget USDPRICE / BTCUSD.  say widget priced at $10 as of today I would list it at 10/3.34 =  3 BTC

Now what happens if BTC goes to $10 tomorrow? I would have to lower my price to 1 BTC. why? because why would someone pay 3 BTC when they can convert the 3 BTC to $30 and just buy it for $10.

What if BTC drops to .50 usd? I cant leave my price at 3 BTC, because someone would buy my entire inventory and sell it on ebay below the market price of $10 for an easy profit.

So basically BTC becomes a proxy for USD, because one can easily arbitrage products priced in both currencies.

This is not the case for say EUR and USD because of the geographical location it is difficult and costly to arbitrage a widget from London to NewYork. This is why the price of ipads in EUR and the price of ipads in USD don't change even though EURUSD changes everyday.

so it seems that BTC is only really viable for services and not commodities. also only if this service is not available in any other currency.

am i missing something? I bet that anyone that has ever bought anything with BTC, makes a quick calculation to see if its worth it based on the current BTC to local currency rate.

of course BTC becomes viable during hyperinflation or US default.. but a stock market crash or the coming double dip recession should send BTCs back around .50 imo.

please enlighten me.

 Huh Huh Huh




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May 05, 2011, 03:24:30 AM
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You would want to set up something that automatically kept the prices in sync.  Yes, you're correct, if you fix the prices for two different currencies, you're inviting a buyer to always pick the currency most favorable to them.  If they're in sync, and you're as willing to accept BTC as USD, that difference will be moot.

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May 05, 2011, 03:27:50 AM
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This is definitely an issue, and likely a reason we haven't seen many brick and mortar stores accept Bitcoin. As the currency is so new, it's still very volatile. There's somewhat of a catch 22, in that: prices will become less volatile if many businesses use Bitcoins; but businesses won't use Bitcoins until prices smooth out.

One potential solution (IANAeconomist) would be to create your own currency. One Bitbuck may be redeemed for 1 Bitcoin, but the amount of Bitcoins you pay me when I redeem a Bitbuck is equal to an x-day moving average of Bitcoin prices. You can price your inventory in BitBucks, and this ensures that you at least have some time to react to fluctuations.

Alternately, we can just wait until adoption does hit a critical mass. I think we're a month or two away from that. First movers get an advantage in that, even if you get 3BTC for your widget and it's worth 1.50 USD, 3BTC might* be worth hundreds or thousands of dollars in a few years.

*I am 90% confident it will be, but again, IANAeconomist.
jaybny
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May 05, 2011, 03:52:03 AM
 #4

it seems that BTC is just a way to send cash over the internets anonymously, w/o fees, paypal, or govt intervention. can be used to donate to wiki-leaks, play poker, maybe buy drugs, etc...

but to be a real currency in itself, merchants and consumers would need to be thinking in BTCs and not constantly converting it to a local currency. this can only happen if merchants expenses are in BTCs and consumers costs-of-living are also paid in BTCs.  (Another major hurdle is paying taxes in BTCs)


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May 05, 2011, 03:55:02 AM
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peg the bitcoin price to the 24 hour weighted average from MtGox, and have a script update the price once each night.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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May 05, 2011, 04:07:29 AM
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but to be a real currency in itself, merchants and consumers would need to be thinking in BTCs and not constantly converting it to a local currency. this can only happen if merchants expenses are in BTCs and consumers costs-of-living are also paid in BTCs.  (Another major hurdle is paying taxes in BTCs)
Of course. That's why it's a fledgling currency and not a well-established one. As more shops and service providers accept Bitcoin, it will become a real possibility to have all expenses in Bitcoin and denominate prices in bitcoins. Until then, making the conversion on the fly will have to do.

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jaybny
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May 05, 2011, 04:22:21 AM
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Quote
fledgling currency

its up over 400% in 2 weeks, and people are calling for $10 to $100 within weeks or months. im just questioning the valuation.

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May 05, 2011, 04:31:03 AM
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Quote
fledgling currency

its up over 400% in 2 weeks, and people are calling for $10 to $100 within weeks or months. im just questioning the valuation.
You don't need to have an opinion about the valuation. You can programmatically sell bitcoins on mtgox immediately when you receive payment. What you gain by it is offering your customers a convenient payment method without fees and chargebacks. As Bitcoin becomes more established you will need to worry less about fluctuations in the exchange rates, and use it as a currency on its own without conversions.

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Bitcoil - Exchange bitcoins for ILS (thread)   |   Israel Bitcoin community homepage (thread)
Analysis of Bitcoin Pooled Mining Reward Systems (thread, summary)  |   PureMining - Infinite-term, deterministic mining bond
jaybny
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May 05, 2011, 04:37:40 AM
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Quote
fledgling currency

its up over 400% in 2 weeks, and people are calling for $10 to $100 within weeks or months. im just questioning the valuation.
You don't need to have an opinion about the valuation. You can programmatically sell bitcoins on mtgox immediately when you receive payment. What you gain by it is offering your customers a convenient payment method without fees and chargebacks. As Bitcoin becomes more established you will need to worry less about fluctuations in the exchange rates, and use it as a currency on its own without conversions.

im not a merchant, im a trader. I bought some BTCs, but I am now starting to question its valuation, and its viability as a currency.

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May 05, 2011, 04:43:04 AM
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but to be a real currency in itself, merchants and consumers would need to be thinking in BTCs and not constantly converting it to a local currency. this can only happen if merchants expenses are in BTCs and consumers costs-of-living are also paid in BTCs.  (Another major hurdle is paying taxes in BTCs)

I played poker today for dollars in a 'legitimate' establishment and had a pretty good day. As I was coming home I thought "damn, that's not even 200BTC" Does that count for anything?

Play Bitcoin Poker at sealswithclubs.eu. We're active and open to everyone.
bitjet
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May 05, 2011, 04:44:54 AM
 #11

peg the bitcoin price to the 24 hour weighted average from MtGox, and have a script update the price once each night.


^^^
He is right there IS already a a widget. Here it is.

say for example your product is worth $10 usd. Use this widget like this

"http://www.cablesaurus.com/cgi-bin/usd2btc.cgi?usd_value=10"

you can use that address to generate an image.

the result will be compared to mtgox current price and look like this:



here is the link to the script.

http://bitcointalk.org/index.php?topic=6415.0

Would be nice to tie the price to the 7 day average though to keep it fairly steady.


proudhon
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May 05, 2011, 04:47:32 AM
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Quote
fledgling currency

its up over 400% in 2 weeks, and people are calling for $10 to $100 within weeks or months. im just questioning the valuation.

No way.  I seriously doubt bitcoins will be trading around $100 by the end of the year, let alone within weeks or months.  Maybe $100 in a few years, maybe.
jaybny
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May 05, 2011, 04:51:32 AM
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but to be a real currency in itself, merchants and consumers would need to be thinking in BTCs and not constantly converting it to a local currency. this can only happen if merchants expenses are in BTCs and consumers costs-of-living are also paid in BTCs.  (Another major hurdle is paying taxes in BTCs)

I played poker today for dollars in a 'legitimate' establishment and had a pretty good day. As I was coming home I thought "damn, that's not even 200BTC" Does that count for anything?

yes indeed!

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May 05, 2011, 05:04:13 AM
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Of course BTC becomes viable during hyperinflation or US default.. but a stock market crash or the coming double dip recession should send BTCs back around .50 imo.

Actually I don't think this is true. In a recession, btc could easily go up in nominal or even real value. If they are simply treated as an investment, and not a currency, then you could have people selling off bitcoins in a recession because they feel its a risky investment, and their confidence is down. This would drive down the value of bitcoins.
But, if bitcoin acts as a true currency, we could easily see the opposite effect in a recession. Particularly in the case of a US default, which would cause massive capital flight and tank the value of US currency, and raise the value of all other currencies. Particularly if the bitcoin is seen as a safe currency, it could substantially rise in value in the case of a recession. It could go either way.

jo.bo.co design services (http://bitcointalk.org/index.php?topic=6416.msg93676#msg93676)
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May 05, 2011, 05:09:06 AM
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Quote
fledgling currency

its up over 400% in 2 weeks, and people are calling for $10 to $100 within weeks or months. im just questioning the valuation.
You don't need to have an opinion about the valuation. You can programmatically sell bitcoins on mtgox immediately when you receive payment. What you gain by it is offering your customers a convenient payment method without fees and chargebacks. As Bitcoin becomes more established you will need to worry less about fluctuations in the exchange rates, and use it as a currency on its own without conversions.

im not a merchant, im a trader. I bought some BTCs, but I am now starting to question its valuation, and its viability as a currency.
"You" can be the merchant who you worry will not be able to use Bitcoin as a currency.

Let's put it this way. When I purchase in USD, I make a quick calculation to convert it to ILS. Does that mean USD is not a viable currency? No, it only means that USD is not my local currency. The hope is that in the future, Bitcoin will be everyone's local currency. Until then, it will be a currency for those who wish to view it as such, and an incredibly superior payment method for others.

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May 05, 2011, 06:21:47 AM
 #16

No way.  I seriously doubt bitcoins will be trading around $100 by the end of the year, let alone within weeks or months.  Maybe $100 in a few years, maybe.

People are bad at estimating the rate of change. Personally, I think a 25% probability confidence of bitcoin taking off to stratospheric level in a J curve. Heck the bitcoin price charts look like a J curve.

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May 05, 2011, 07:12:33 AM
 #17

An exponential graph always looks the same shape, you just scale it differently based on where you are pricewise. This could be the very very beginning of an exponential curve - it's impossible to tell where it will level off.

Personally I give it 90% confidence
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