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Author Topic: please stop sating bubble unless you define/understand it  (Read 4008 times)
Justsomeforumuser
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May 15, 2011, 06:51:55 PM
 #21

If you cannot calculate expected exchange rates within a discernable range, you cannot build an economy. Why do you think the BOJ intervenes in the market so often? At some point exporters run into trouble.

I know right! Silly Satoshi created a digital currency and forgot to force the entire world to adopt it immediately and completely. Relying on the market, what a noob...

It's both hilarious and sad to see how little people really understand how anything really works.

It's a cart before the horse / hen-egg issue. BTC may be a speculative item, but a ccy, it is not.

If anyone took the time to think through the trouble a merchant is facing with something like BTC..

Okay, you value your stuff in BTC, but they have to correspond to the real world(because people need a price).
So if the value of BTC asked for item x has to constantly be readjusted to correspond to the current exchange rate(normally this is not "as needed" because A REAL ECONOMY EXISTS and a country/ECB behind it and things offset mostly internally, i.e. you know that 5 EUR aren't just 2 breads, but maybe a happy meal, two socks, 3 bags of chips etc pp and you could just get those for the same 5 EUR at any point in time).

So let's take the diapers someone else just bought. From say costing 5 BTC one day for a 5$ item at 1:1, to them costing 1 BTC the next at 5:1, the guy selling them is now faced with the dilemma that he may be sitting on 10 BTC from 2 sales in one week, but now only 2 BTC from 2 sales in the next. So he now has 12 BTC for a total item value sold of 20$.

If the BTC at this point fluctuates back below 1.66, he is effectively sitting on a loss.

Widen the proportions and increase the "bad timing" factor(make him sell 10 Diapers in week 2 and you now need BTC to stay >=3$ for him to break even/profit), and the shop owner is quite literally screwed if he keeps his BTCs and then needs real money at a bad point in time. (THIS is why you need a stable exchange rate)

Now, you can obviously circumvent this by immediately cashing out every single BTC purchase into real world currency as soon as it is processed/done, so as not to expose yourself to a risk of random losses of half or more of your capital.

But here the fun begins, as we have no CB(or any banks at all) or any other real liquidity provider guaranteeing rates, making price etc, so there is near to no liquidity.

The more you would try to build an economy by increasing vendors and sales made, the less likely it is, as they exponentially would require more liquidity to constantly re-change the BTCs as a sale is made.

So you are quite literally stuck with every single sale meaning being an unwilling participant in a huge speculation gamble, and that's just not something anyone not completely retarded businesswise would expose themselves to in a large scale.

So, uhm, yes. My core problem remains with the constant babble about economy and markets when there quite literally is no such thing INTERNALLY, because there can't be the way things are.

Feel free to -as always- "disprove" this with "great" other examples, but the issues of real world economy vs make-believe I-really-just-want-it-to-be-so still persist.
You need EITHER a stable exchange rate OR a deep enough liquidity before anything can really happen "big enough"(there are obviously vendors out there taking BTC in some way and for some reason, lord knows how their books look and how they offset it), and establishing either has not been solved nor does seem likely to be easily solved with the mentalities and participants described both here and in other discussions before.

But hey, as has been said..let's see what's what in 10 years.

Ho-Hum.
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rezin777
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May 15, 2011, 07:40:29 PM
 #22

It's both hilarious and sad to see how little people really understand how anything really works.

It's a cart before the horse / hen-egg issue. BTC may be a speculative item, but a ccy, it is not.

So, uhm, yes. My core problem remains with the constant babble about economy and markets when there quite literally is no such thing INTERNALLY, because there can't be the way things are.

But hey, as has been said..let's see what's what in 10 years.

So, a Bitcoin economy can't exist because a Bitcoin economy doesn't exist. Therefor Bitcoin will only ever be a plaything for speculators.

I think that an infrastructure will be built (is being built) around whatever Bitcoin is used for, and people will use that infrastructure in other Bitcoiny ways.

In other words, it will expand. With size will come stability. With stability will come more merchants willing to price their goods in Bitcoins.

It all depends on whether or not people find Bitcoin useful (for whatever purpose), and use Bitcoin.   

My point was none of this is instantaneous and it would be impossible to make it instantaneous without a central force.
MemoryDealers
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May 15, 2011, 11:21:56 PM
 #23

As an online merchant who is trying to deal with these exact issues,   I would like to offer a few thoughts.

1.  I think it will be quite some time before items are priced ONLY in BTC.  I think most merchants will list their prices in USD, EUR, Yen, RMB etc and ALSO be willing to accept BTC at the current exchange rate at the time of sale.

2.  To deal with the wild exchange rate fluctuations merchants have three main options:
      A.  Hold onto the BTC in the hopes the value will increase further.
      B. Find another merchant to spend the BTC to.
      C. Exchange them immediately for a national currency.  

I suspect "C" will be the most common.  With a little programming a system can be setup to calculate the required amount of BTC required at the time of sale.
In fact,  bitcoincharts.com has a wonderful calculator that would allow a merchant to calculate how many bitcoins they would need to sell to receive the required amount of USD.
See here:



With a little programming,  I am sure an automated system can be setup where the merchant can sell their bitcoins for the expected amount of national currency as soon as they receive the payment.  The sooner people can develop software to do this for common shopping cart programs such as Magento and Open cart,   the sooner major merchants will begin accepting bitcoins as payment.

Justsomeforumuser
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May 15, 2011, 11:32:28 PM
 #24

With a little programming,  I am sure an automated system can be setup where the merchant can sell their bitcoins for the expected amount of national currency as soon as they receive the payment.  The sooner people can develop software to do this for common shopping cart programs such as Magento and Open cart,   the sooner major merchants will begin accepting bitcoins as payment.

Right. And that will be the point where the current "people to people" volume could be tested vs a business trying to constantly swap out currency. Who is going to be the counterparty at all times? Or, to put it differently, how are you going to deal with your margin evaporating if you get constantly lower requotes until all your desired BTC offers are filled?

I still see potential for huge financial risk in all of this, and the whole exercise boils down to bending over backwards to end up doing what you should have done in the first place: pay in real currency.
That's really the main point and the utterly nutty thing about all of this(an extra currency conversion step for what? Literally every bank in the whole world will exchange to and from the USD and accordingly CC companies, too. You're not opening up payment options to a formerly untapped market, you're really just catering to an idee fixe right now. Everyone who has bought BTC also has real hard currency as well and with those that have mined them it doesn't change much whether you or they exchange them back out first, they WILL get changed back to USD/whatever anyway).

Ho-Hum.
altoid
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May 17, 2011, 02:01:51 AM
 #25

You're not opening up payment options to a formerly untapped market, you're really just catering to an idee fixe right now.
this thread got off topic, but oh well.  there are niche uses for bitcoin that make it superior to other payment methods, many of which I am sure are undiscovered at this point.  Maybe someday it will become stable, widely accepted, etc, etc, but the seed of this economy will come from bitcoin's edge over other currencies in niche areas.
niklas_a
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May 17, 2011, 08:31:58 PM
 #26

This problem exists in the real economy too. Let's say I pay to build a car using euros and sell it in north america priced at a fixed price $9,900. The USD can go up or down in value. If it gets stronger I will get less money in euros and potentially lose money.

That's why we have Foreign Exchange options (FX). I pay a third party a small premium to guarantee me a certain exchange rate. We need this in BitCoin too.

Let's say 1 BTC is trading at $5 USD today. Then someone could charge me 0.1 BTC to issue an FX. The FX would guarantee that I within 3 months can exchange 1 BTC for $5 USD with them.
kiba
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May 17, 2011, 08:34:00 PM
 #27

http://www.bitcoinweekly.com/articles/comic-reaction-after-dramatic-rise-of-bitcoin-s-value

Finally, a parody of people who cries Bitcoin Bubble every time after dramatic rise of Bitcoin's value.  Grin

cuddlefish
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May 20, 2011, 05:52:56 PM
 #28

Most common.  With a little programming a system can be setup to calculate the required amount of BTC required at the time of sale.
In fact,  bitcoincharts.com has a wonderful calculator that would allow a merchant to calculate how many bitcoins they would need to sell to receive the required amount of USD.
See here:

That's my code underneath that calculator! It's all grown up, I feel so proud...

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