Explanation of why Bitcoin price is falling.

[goddyvips001]

Some of expert report told why the Bitcoin price is falling.
"Bitcoin price is going down because we are starting to use Bitcoin to buy things instead of holding Bitcoin for speculation. I am not invested in Bitcoin financially, but I am invested in Bitcoin intellectually, because I think it will help bringing about a better world. Therefore, I am glad to see that a “real” Bitcoin economy is taking off, where a critical mass of people use Bitcoin as a real currency for real transactions. That will, simply put, change the world.

Remember that there is no such thing as “intrinsic value.” The value of Bitcoin is uniquely determined by the marketplace of buyers and sellers – how many people want to buy, or sell, for how much. Until some time ago, most users wanted to buy and hoard Bitcoin for speculation, in the hope that the price would go up, and also because there wasn’t much that you could do with your coins anyway. That pushed the price up.

The “speculation phase” of the Bitcoin economy has been terribly important because it has put Bitcoin on the map and generated a lot of press coverage. As a result, today we have a critical mass of Bitcoin users, and we see the beginning of the first “real phase” of the Bitcoin economy.

More and more people want – or need – to sell Bitcoin to buy goods, and more and more merchants accept Bitcoin. But remember that, in the vast majority of cases, your coins are converted to fiat currency on-the-fly, because fiat currency is what the merchant wants to receive. That is a sell order that pulls the value of Bitcoin down. If more and more people use their coins to buy things, the result is that the price of Bitcoin goes down.

Now and then there are important and positive announcements, game-changers, which temporarily push the value of Bitcoin up. For example, last week PayPal partnered with three major Bitcoin exchanges. This very important announcement, which clearly shows that Paypal is committing to Bitcoin, pushed the value of Bitcoin up for a few hours… but then it went down again and continued to go down. The good news is that, sometime soon enough, Paypal users anywhere in the world will be able to do their Paypal purchases with Bitcoin. But there is a price to pay: the 150 million (and growing) Paypal users will be able to spend their coins with one click. What is the result? Yeah, right."

[AtheistAKASaneBrain]

People using Bitcoin to buy actual goods is a good thing, but

1) Where is the data?
2) Why should the price go down unless the Bitcoins that are spent by people are being withdrawn for FIAT by the merchants as soon as they recieve them? Because it's what i've hear about Overstock. If this is what they are doing, the price is going to keep falling down, unless im getting somethong wrong.

[vipgelsi]

Alot of scared sheep dumping pluss anytime u buy with bitcoin at a store they automaicly dump it on the exchange unless the owner decides to hoard it.

[sgbett]

Price goes down because supply is greater than demand.

Demand is on a long term steady increase, supply varies based on how aggressively miners are selling.

Right now, we are in the aftermath of massive capital expenditure on mining gear, which people are desperately trying to get some ROI

[goddyvips001]

Its a simple market concept of demand and supply which determines the price,their are other macro factors too that determine the price of Bitcoin like government intervention or policy,inflation or deflation on dollar,etc.So only supply will not determined the price of btc

[pitham1]

In the long term, higher adoption rates will lead to higher prices....

[zoinky]

I don't see why people think merchant adoption would cause the price to drop drastically, if someone with bitcoin wanted to buy something that wasn't for sale for bitcoin, they would just sell to a fiat currency and make the purchase.  It's a weak argument imho to say merchant adoption is driving the downtrend, the cost of mining combined with the Gox aftermath is more so to blame.

[EricTyle]

I don't see why people think merchant adoption would cause the price to drop drastically, if someone with bitcoin wanted to buy something that wasn't for sale for bitcoin, they would just sell to a fiat currency and make the purchase.  It's a weak argument imho to say merchant adoption is driving the downtrend, the cost of mining combined with the Gox aftermath is more so to blame.

False. I hold 10+ BTC and I only spend them when I can spend BTC. Otherwise I just use fiat. I do not convert BTC to fiat to make a purchase - that's done on the merchant's side

[Room101]

Remember that there is no such thing as “intrinsic value.”

BTC and gold and fiat have no intrinsic value. Thats what make them good money. Silver, food and water have intrinsic value.

[Wilhelm]

Remember that there is no such thing as “intrinsic value.”

BTC and gold and fiat have no intrinsic value. Thats what make them good money. Silver, food and water have intrinsic value.

Intrinsic has to do with properties of the material, system etc.
Value is that what people give to it. Value can be determined by many factors of which usability or aesthetics are some.

So there IS a thing as "intrinsic value" it just depends on how you read it.

A person can give value to the intrinsic property (by desiring it).
The intrinsic property does not determine its value (it does not necessarily make it more desirable).

[vuduchyld]

From the perspective of an economist, the argument prices drop as users transact in BTC is an argument about an increase in velocity.

From the perspective of most (Moore's Law), the value of BTC increases in proportion to the square of the number of users in the network.

Is it true that people buy things from Overstock or Dell and pay in BTC?  Sure.  And is it true that Overstock and Dell likely convert the vast majority of those purchases into fiat?  Sure.  But the notion that these purchases dramatically affect velocity is a MAJOR stretch.

I believe there are a lot of  misconceptions about BTC velocity.  I've read from many sources that the velocity of BTC is similar to that of the USD.  In my opinion, those velocity calculations include things like mining transactions, which would be akin to including the printing press as a dollar transaction.  BTC velocity is significantly lower than the USD and it will remain that way for quite some time.  Besides, I'd suspect I'm not alone in that when I purchase in BTC, I re-purchase the BTC usually immediately, or close to it. 

Bottom line is that the INCREASE in value that comes with adoption FAR outweighs the impact on value of a minor velocity uptick. 

If you don't believe me, take either case to the extreme.  Imagine BTC being everywhere.  You can pay your electric bill, you can buy pizza, you can receive part of your paycheck in BTC.  Compare that to, say, how BTC was two years ago.  You can only buy it, hodl it, trade it all on dubious exchanges.  In which case is BTC more valuable?

I'm getting pretty damn sick of the fallacious claim that adoption and use is the cause of the price decline.  I've seen it frequently and it is plainly wrong.

[jaberwock]

People using Bitcoin to buy actual goods is a good thing, but

1) Where is the data?
2) Why should the price go down unless the Bitcoins that are spent by people are being withdrawn for FIAT by the merchants as soon as they recieve them? Because it's what i've hear about Overstock. If this is what they are doing, the price is going to keep falling down, unless im getting somethong wrong.

Most commerces that accept BTC use Bitpay, including Paypal. And Bitpay dumps the coins as for money on exchanges.


Maybe if people could also get BTC for sales, the things would not be so bad

[arieq]

Price goes down because supply is greater than demand.

Demand is on a long term steady increase, supply varies based on how aggressively miners are selling.

Right now, we are in the aftermath of massive capital expenditure on mining gear, which people are desperately trying to get some ROI

At the same time, too many merchants just converting their BTC to fiat. Its when the merchants start holding that we really start moving up, or when Paypal offers BTC —> USD services, buyer protection, etc then people will use it. I think a lot of people are too scared to use btc now

[sgk]

But remember that, in the vast majority of cases, your coins are converted to fiat currency on-the-fly, because fiat currency is what the merchant wants to receive. That is a sell order that pulls the value of Bitcoin down.

^^  This essentially is the real driver. Merchants are accepting Bitcoins through exchanges like coinbase. Rather than Bitcoins going directly to merchants, they're converted to fiat and the merchant is paid in fiat only.

It has been discussed in detail here:
https://bitcointalk.org/index.php?topic=407947.0

[Hunyadi]

If I want to buy something, I will:

sell bitcoins and buy it with FIAT
or
Use bitcoins to buy it, and the merchant will convert bitcoins to FIAT.
What's the difference?

[hyphymikey]

We are going down because someone is trying hard to run miners out of business. This way they can obtain a bigger piece of the total hashrate. The longer they keep the price down the more miners that will turn off their machines and the more coins this entity will get. It's like wal mart coming in with their cheap prices trying to run all the neighborhood stores out of business to obtain the market share. How long they will be able to do this is not known.

[inca]

We are going down because someone is trying hard to run miners out of business. This way they can obtain a bigger piece of the total hashrate. The longer they keep the price down the more miners that will turn off their machines and the more coins this entity will get. It's like wal mart coming in with their cheap prices trying to run all the neighborhood stores out of business to obtain the market share. How long they will be able to do this is not known.

Yes this is something I have briefly worried about, especially if it is a central bank.

[zoinky]

I don't see why people think merchant adoption would cause the price to drop drastically, if someone with bitcoin wanted to buy something that wasn't for sale for bitcoin, they would just sell to a fiat currency and make the purchase.  It's a weak argument imho to say merchant adoption is driving the downtrend, the cost of mining combined with the Gox aftermath is more so to blame.

False. I hold 10+ BTC and I only spend them when I can spend BTC. Otherwise I just use fiat. I do not convert BTC to fiat to make a purchase - that's done on the merchant's side

Yes, there are probably a lot of people like you, but 10 BTC is not an amount that can really contribute to this downtrend.

[goddyvips001]

We are going down because someone is trying hard to run miners out of business. This way they can obtain a bigger piece of the total hashrate. The longer they keep the price down the more miners that will turn off their machines and the more coins this entity will get. It's like wal mart coming in with their cheap prices trying to run all the neighborhood stores out of business to obtain the market share. How long they will be able to do this is not known.

I aggree with u

[bababooey]

We are going down because someone is trying hard to run miners out of business. This way they can obtain a bigger piece of the total hashrate. The longer they keep the price down the more miners that will turn off their machines and the more coins this entity will get. It's like wal mart coming in with their cheap prices trying to run all the neighborhood stores out of business to obtain the market share. How long they will be able to do this is not known.

I aggree with u

Interesting theory, I haven't heard this one before. Certainly plausible.