Price stickiness at $5 USD/BTC?

[mccorvic]

I love the conspiracy theories in this thread.  You people can make conspiracy theories involving the lint in your dryer!

Anyways, anything over a .25 increase a month on the major exchanges make me nervous. We, as the bitcoin community, are still suffering social punishment over the $30 peak last year.  Now, we deserve all the criticism we got for it, but if it happens again then it would really do some damage to BTC future.

Not really.

I can't wait to go to $10 and I bet others who bought last year at like $15 too.

For the record, I only bought at $0.58 back in May 2011 and sold at highs.

I can only feel sorry for the fools buying at $17 or $15 last year.

Can we have another bubble, PLEASE !?
 

^^^^ This is what I'm talking about, yo

[1714053527]

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[nimnul]

Also remember that we had a tiny bubble in autumn - the price rose from 3 to 7 and fell back to 5. I was unfortunate enough to buy at 6.4

[unclescrooge]

I don't think we're going to see another bubble like last year. As soon as price rises fast like yesterday, some will sell their holding for fear of a burst.

So bitcoin will rise in value as the bitcoin economy grows, but it will be a healthy growth

[Sant001]

Why is the price stuck at $5/6?

It's been my impression that most miners are selling it for cost + small margin on top. I have recently begin mining and $5 was the price I needed to recover my costs within a year. So this price makes sense from my mining point of view.

The biggest source of volatility in the price of bitcoin, seems to be the speculation done by investors which pump the prices up.

I believe the prices have been stable for the last couple of months because of previous crash that might have scared away these speculators.

Honestly, I think it is better for the bitcoin future if the prices could be remain stable. Because then people would think of it more as a means of buying things rather then buying and holding the currency.

[nimnul]

It's been my impression that most miners are selling it for cost + small margin on top.

It's not the case. Less than 1/3 of the miners do like this. See https://bitcointalk.org/?topic=86010 (people can put 2 check marks there so numbers don't add to 100). I pay my mining expenses from my pocket and don't spend my mined BTC.

The biggest source of volatility in the price of bitcoin, seems to be the speculation done by investors which pump the prices up.

Speculators don't bring more volatility but reduce it. If you buy low and sell high you shift the price closer to equilibrium, not away from it. And many speculators cannot pump price up - some will try to pump up, but other people will try to capitalize on that attempt. I think the only way of "artificially pumping" the price is one big manipulator putting his $200k+ at risk. A quite brave man indeed.

I believe the prices have been stable for the last couple of months because of previous crash that might have scared away these speculators.

I think quite the contrary: I think the price was stable because the only people trading in those dark days were speculators, "the sharks" as someone put it. And teenagers and housewives were removed from the market and attracted to ZhouTong/SatoshiDice type of gambling which is more or less closed-circuit and doesn't affect the market.

]Honestly, I think it is better for the bitcoin future if the prices could be remain stable. Because then people would think of it more as a means of buying things rather then buying and holding the currency.

Bitcoin is doomed to a steady exchange rate growth because of a) its algorithmically limited supply b) an irresistible temptation for Federal Reserve and European Central Bank to increase the supply of paper. Gold  prices in USD increased 580% in last 10 years, oil increased 320%, corn 400%.

We cannot have stable exchange rate as I described above but we don't need it either. We only need less volatility - 1% daily rate change must be quite acceptable for merchants and service providers. If we target less than 1% of daily growth we can afford to have up to 3800% yearly growth which is a quite high limit. To get less volatility we need to attract more hoarders (which remove USD from their mattresses and put them into bitcoin market) and more speculators (which extract profits from reducing volatility), not less. With more money in the market it's volatility will go down and BTC will be more attractive to real producers of goods and services. The inherent benefit to early adopters boosts Bitcoin, not suppresses it.

[nimnul]

My point was that any means of increasing market depth are good - being that money coming from merchants, producers, services, speculators, manipulators or hoarders.

[molecular]

We cannot have stable exchange rate as I described above but we don't need it either. We only need less volatility - 1% daily rate change must be quite acceptable for merchants and service providers.....

I really don't understand why merchants seem to have a problem with volatility. If they really want to peg their prices to the US dollar or some other currency, then why don't they do it themselves and apply a script that gets the latest exchange rate, and calculates the correct prices from that?

They could make it fancy by calculating a moving average, and even add a safety margin, so that their site displays a daily or weekly price for their products.

In time, the network effect of implementing such features would surely stabilise the exchange rate even more.

Couldn't they hedge against the fluctuations?

[nimnul]

If they really want to peg their prices to the US dollar or some other currency, then why don't they do it themselves and apply a script that gets the latest exchange rate, and calculates the correct prices from that?

It's not about pegging to fiat. It is about specifying price in advance.

a) Not all media support realtime tags. For example, grocery stores still have price tags physically printed and attached to goods. With BTC it is simply not possible - they have to reprint and reattach tags every hour or stop specifying prices at all - customers will have to use scanners to check the price. Few shops here in Ukraine have such scanners so you can use it to check the price against the latest database of the supermarket. But it's for doubtful cases only, having to do this to find any price is painful.

b) Not all contracts support immediate purchase. For example, if I call a taxi the operator can tell me the price in advance. But not in BTC. Let's say I have 10 BTC. The operator says the price for my trip is 3 BTC but mtgox crashes and at the end of my trip the price becomes 30 BTC. So either taxi company or the passenger have to lose. Same for many other options - ordering a pizza, train/airplane/football tickets etc.

The problem that if you displauy price in any commodity (gold, bananas, whatever) or in currency there are no need for realtime prices. With BTC such need arises and causes additional burden and expenses.

Couldn't they hedge against the fluctuations?

They couldn't because they are just vendors and not finance professionals. But their payment processor could. But at the moment there are no such processor.

[mccorvic]

We cannot have stable exchange rate as I described above but we don't need it either. We only need less volatility - 1% daily rate change must be quite acceptable for merchants and service providers.....

I really don't understand why merchants seem to have a problem with volatility. If they really want to peg their prices to the US dollar or some other currency, then why don't they do it themselves and apply a script that gets the latest exchange rate, and calculates the correct prices from that?

I do know some BTC merchants show BTC conversions relative to Mt. Gox, but with fluctuating prices they have to either immediately spend their BTC somewhere else or convert it into USD in order to not potentially lose everything.  That really isn't a good selling point on why merchants should except BTC.

[nimnul]

the US dollar/EUR currencies are very unstable against gold right now

Today's gold instability is about 1.2% (1630 high 1610 low). According to my Bitcoin Analytics charts today's btc fluctuation is 6% for 1000 BTC volume (6.41 high 6.01 low) and 34.8 (8.09 high 6 low) for 10 BTC volume.

If 1.2% is "very unstable" how do you call 34%?

[nimnul]

My point is that USD/Gold is stable, but USD/Bitcoin is unstable so the USD/Gold example is irrelevant.

[Sant001]

a) Not all media support realtime tags.

Exactly. But I'd go further and say that even if the media supports it such as a web store, the buyers would be confused by the quickly changing prices.

I can say from experience as I have tried running a web shop where the prices changed daily according a many factors such as market price and currency exchange rates.

The result was low sales, which immediately improved once I stabilized the prices and stopped treating my shop like a market and more like... a shop!

One of the issues I'd often run into was angry customers demanding a refund once they saw a price drop of something they had just bought.

I'd get an angry e-mail complaining why this price has fallen, I'd explain why it happened and that it could have gone up as well. They didn't care, they're not used to this. I could make them understand if the order had already been shipped out I couldn't do anything about it. But if the order had not yet been shipped, they'd demand a refund, period. And might or not use the money to order again and keep the difference.

Anyhow was a major annoyance. We initially thought our customers would enjoy a market-like shop, where they could get always the latest price for the goods, but most people didn't like this idea at all.

Hence my belief that exchange rate stability is important to make bitcoin more palatable to the average buyer.

[mccorvic]

It sounds like they already do cash-out immediately. Otherwise, why would they care?

Because it isn't a very good selling point for BTC? "Hey, accept BTC so you can waste your time converting it to USD anyways! Oh, wait..."

Exactly. But I'd go further and say that even if the media supports it such as a web store, the buyers would be confused by the quickly changing prices.

I can say from experience as I have tried running a web shop where the prices changed daily according a many factors such as market price and currency exchange rates.

The result was low sales, which immediately improved once I stabilized the prices and stopped treating my shop like a market and more like... a shop!

One of the issues I'd often run into was angry customers demanding a refund once they saw a price drop of something they had just bought.

I'd get an angry e-mail complaining why this price has fallen, I'd explain why it happened and that it could have gone up as well. They didn't care, they're not used to this. I could make them understand if the order had already been shipped out I couldn't do anything about it. But if the order had not yet been shipped, they'd demand a refund, period. And might or not use the money to order again and keep the difference.

Anyhow was a major annoyance. We initially thought our customers would enjoy a market-like shop, where they could get always the latest price for the goods, but most people didn't like this idea at all.

Hence my belief that exchange rate stability is important to make bitcoin more palatable to the average buyer.

It's good to hear common sense and real-life experience on these forums.  Too many people here think that everyone in the world thinks MARKETS!RALLYS!GOLDDOWNDOLLARUP! all the time.  People want stability and predictability in their financial planning. 

[mccorvic]

Because it isn't a very good selling point for BTC? "Hey, accept BTC so you can waste your time converting it to USD anyways! Oh, wait..."

Are you just trying to troll?  How about accept BTC as a payment SYSTEM because it is cheaper than VISA, protects you from chargebacks/fraud, and has no merchant account holds/reserves.

Warning! Conflicting viewpoint! Danger! Cannot computer! Conclusion: must be troll

No son, a system that requires you to immediately move around your money and make conversions and pray to the god on Mt. Gox that prices don't drop .50 USD in the next 10 min is really actually a huge headache.  Of COURSE you're right that BTC as a system is way way better than Visa, etc. Don't ever believe I argued that, son.

But it'd be BETTER x2 with stability. I really can't believe that this point would cause you to flip out so much.

EDIT: And that's from the merchants point of view. As BTCCHINA pointed out, people like stability.  No one is going to want to spend BTC on anything if there is a high chance that price go down/BTC value goes up by 10% within the hour.

[mccorvic]

No one is going to want to spend BTC on anything if there is a high chance that price go down/BTC value goes up by 10% within the hour.

Well my sales would indicate otherwise but what do I know I am only selling services in BTC everyday.

Trading = selling BTC for fiat.
Buying = selling BTC for goods.

Your belief that people will trade (selll BTC for $$$) but not buy goods (sell BTC for goods) due to volatility is kinda silly. 

Of course volatility hasn't been 10% in 10 minutes in a long time.  If you spent more time selling and less time trolling you might realize that.

Feel free to have the last word I won't be here.

I guess we're talking about two different things. You are obviously a user who is very involved in the community and market to users who are likely very involved. I thought we were talking about widespread adoption of BTC to other merchants and more average users to grow BTC adoption. I didn't realize that you were arguing the "keep BTC niche" position.  My apologies.

Again, WE know that volatility hasn't been 10%.  But my most measures it's still pretty high.  A lot of people who don't yet use BTC but know OF BTC have the $30 spike/crash as a schema in their mind of what BTC.  Only long periods of slow change will remove that incident from the mainstream mind. 

[dextryn]

No son, a system that requires you to immediately move around your money and make conversions and pray to the god on Mt. Gox that prices don't drop .50 USD in the next 10 min is really actually a huge headache.  Of COURSE you're right that BTC as a system is way way better than Visa, etc. Don't ever believe I argued that, son.

But it'd be BETTER x2 with stability. I really can't believe that this point would cause you to flip out so much.

EDIT: And that's from the merchants point of view. As BTCCHINA pointed out, people like stability.  No one is going to want to spend BTC on anything if there is a high chance that price go down/BTC value goes up by 10% within the hour.

I don't necessarily agree with you.  I for one have been operating a small bitcoin marketplace in the last few months and am planning on expanding operations soon.  I always do an immediate cash out (about 90%, the rest I leave for investment).  Yes it isn't as easy as accepting cash only, but you have a HUGE almost untouched market to deal with.  Being a miner myself, there are times I wish I could just grab something quick with BTC, instead of waiting for everything to transfer to my bank account (or taking a percentage hit by trying a more immediate option).  Also, if you offer products in BTC you can get the impulse buyers and people that haven't really connected the BTC exchange rate to actual USD.  All they know is they're making money by mining and want to spend it.  You have to realize that most people on this board and in this thread really care and pay attention to the exchange rate, but there are many people just getting into this and do it casually that don't really pay that much attention.

[mccorvic]

I don't necessarily agree with you.  I for one have been operating a small bitcoin marketplace in the last few months and am planning on expanding operations soon.  I always do an immediate cash out (about 90%, the rest I leave for investment).  Yes it isn't as easy as accepting cash only, but you have a HUGE almost untouched market to deal with.  Being a miner myself, there are times I wish I could just grab something quick with BTC, instead of waiting for everything to transfer to my bank account (or taking a percentage hit by trying a more immediate option).  Also, if you offer products in BTC you can get the impulse buyers and people that haven't really connected the BTC exchange rate to actual USD.  All they know is they're making money by mining and want to spend it.  You have to realize that most people on this board and in this thread really care and pay attention to the exchange rate, but there are many people just getting into this and do it casually that don't really pay that much attention.

I have the feeling that most people with any BTC have some passing knowledge of the exchange rate.  We're still at the point where every news article and almost everyone on this board discuss BTC in direct relation to "fiat" money.  And would you spend 10 BTC on an item knowing that there is a chance that you could get the same item for only 9.5 or 9 BTC tomorrow?

It works both ways, for sure, and I'm not arguing that BTC isn't viable right now and that there isn't a market for BTC buying.

I'm arguing that it'd be better if prices were more stable.

[molecular]

It's good to hear common sense and real-life experience on these forums.  Too many people here think that everyone in the world thinks MARKETS!RALLYS!GOLDDOWNDOLLARUP! all the time.  People want stability and predictability in their financial planning. 

People will have a hard time, then. Stability against a wildly fluctuation USD?

[nimnul]

The question is how a layman measures "fluctuation".

If he comes today 1 hamburger = 1 USD, and tomorrow 1 hamburger = 1 USD it means for him USD is stable. In this layman sense USD is stable against almost everything.

Is it possible to sell hamburgers today at the same price as yesterday if we use BTC? Will it be good for seller? for buyer?

[Bitcoin Oz]

Im for a currency that the government cant steal through inflation. I short fiat at any opportunity by purchasing bitcoins and shares on glbse.