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Author Topic: Why is the Bitcoin value struggling to rise?  (Read 1494 times)
Faisal7
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June 02, 2012, 09:03:38 PM
 #1

Something is holding it back.

What is it?

Fear that something better could come around? Doubting that. I think there is a catalyst keeping this down, just not sure what it would be.

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cytokine
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June 02, 2012, 09:07:36 PM
 #2

For one thing, the dollar is soaring.

Also look at recent year-over-year values for the PPIFGS ( produce price index finished goods, which is my favorite price index ):

2011-09-01,7.2%
2011-10-01,6.04%
2011-11-01,5.75%
2011-12-01,4.72%
2012-01-01,4.14%
2012-02-01,3.35%
2012-03-01,2.81%
2012-04-01,1.89%

In a couple weeks we'll have May's numbers and we'll see if we've slipped into deflation yet. We haven't had a solid -6% on this set of data since the great depression, so that's the value I'm looking for to be convinced we've finally entered into a deflationary spiral.
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June 02, 2012, 09:10:17 PM
 #3

Maybe it has to do with the fact there is going to be a major shift of value in December ?

Only six months away from cutting the mining reward in half and I have a feeling it makes people uncertain of which way to go.

In theory, the value of BTC should rise as the scarcity of new coins go up, on the other hand this is a new type of market in which this is the first time this shift has happened.

I think much like other established markets, the uncertainty is holding people back.


 
Faisal7
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June 02, 2012, 09:17:28 PM
 #4

Good points so far.

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Faisal7
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June 02, 2012, 09:32:03 PM
 #5

For one thing, the dollar is soaring.

Can you show me where you're seeing a soaring dollar?

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cytokine
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June 02, 2012, 09:41:51 PM
 #6

For one thing, the dollar is soaring.

Can you show me where you're seeing a soaring dollar?

I'm looking at the month of May 2012:

http://stockcharts.com/h-sc/ui?s=UUP&p=D&b=5&g=0&id=p08517603754

The dollar has been in a bull market since mid-2011 when it made its low. Yet, as I said, I don't expect to see the really major moves up until the YOY(PPIFGS) moves decidedly below -6% and the broader economy sinks into a deflationary spiral.
Faisal7
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June 02, 2012, 09:55:23 PM
 #7

For one thing, the dollar is soaring.

Can you show me where you're seeing a soaring dollar?

I'm looking at the month of May 2012:

http://stockcharts.com/h-sc/ui?s=UUP&p=D&b=5&g=0&id=p08517603754

The dollar has been in a bull market since mid-2011 when it made its low. Yet, as I said, I don't expect to see the really major moves up until the YOY(PPIFGS) moves decidedly below -6% and the broader economy sinks into a deflationary spiral.

That's an ETF. Not a reliable measuring device.

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justusranvier
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June 02, 2012, 10:57:18 PM
 #8

MV = PQ

If P is staying relatively constant Q and M are both increasing at the same rate, or close enough that changes in V compensate for any small difference.
nolo200
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June 02, 2012, 11:12:55 PM
 #9

My bet is it hits $10 in December and then crashes right back down to $5 shortly after.
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June 02, 2012, 11:18:51 PM
 #10

Something is holding it back.

What is it?

Struggling to rise?  It is up 10.5% so far for 2012, up 6.5% for the second quarter, 2012, and up half a percent for June already.

So the market (the price where the supply crosses with demand) says a bitcoin is worth about $5.22 right now.

What the market isn't taking into consideration is how Bitcoin as an open protocol is seeing a growing level of mass collaboration occur.  This was already priced in, to some degree, already as there is no way even a fraction of the $40+ million of the currency was necessary to support the level of activity in the Bitcoin economy up until recently.

What has happened in a few short months though is that many assumptions are truly starting to pan out.

It was expected that bitcoin had great value in filling a gap in online gambling.  SatoshiDICE is proving that there was latent demand for this.  Any speculator considering the potential a year or three out will realize that an gambling service that can pay out 98.5% will start to receive some market share that might otherwise have gone to casinos or other online wagering at 97% or 93%, or whatever.  And SatoshiDICE could probably compete at a smaller house advantage if it were pressured to do so from competition, making the advantage over casinos even greater.  This would be a driver for bitcoin demand.

It was expected that there would be easier ways to buy Bitcoin.   Cash deposits at a bank in U.S., Canada and Australia are inexpensive and instant, and now with BitInstant, add 7-11s, Walmart, CVS, etc as other places to do cash deposits.  They also made it easy to convert cash to bitcoin in Brazil (Boleto) and Russia (Qiwi, cyberplat) as well -- two very large and populated countries where acquiring Bitcoins had previously been difficult.

This was expected though (especially since it was announced back when bitcoin was valued under $5), but the market hasn't quite realized how large the demand by these two new countries could really become.

And Bitcoin is starting to approach the functionality needed for use by individuals face-to-face.  Service is still not utility-level (e.g. Blockchain.info's service going down for several days last month) but look at Coinapult's SMS wallet, for instance:
 - https://coinapult.com/sms-wallet
That seriously shows how Bitcoin could start to compete against M-Pesa and Western Union in Africa and parts of Asia, for instance.  All you need is a feature phone and you can receive a remittance payment from a family member.  (What's missing next is a hawalder or local exchanger willing to convert their bitcoins into the local currency that is used.)

But the market is not considering what the demand for bitcoins will be once that starts to become a common occurrence.

Having a digital currency permeate the globe organically is something that has never been done before, so the market doesn't know how to price it.   We people reading this forum do know, but we collectively aren't putting much more than the $37K USD worth into bitcoin that is required each and every day for the exchange rate to just stay stable even, nonetheless increase.

And having temporary setbacks, like Bitcoinica and that whole mess, and Apple showing what dicktards they are with their App Store rejections, and Dwolla imposing the hurdles they did -- those all kick at Bitcoin's foundation and might help explain why even though there are many more great developments with bitcoin, bitcoin's exchange rate ascent will only come after it has proven itself and not earlier based on hope.

the joint
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June 03, 2012, 12:10:30 AM
 #11

Well, one reason may be that the value of a currency doesn't "struggle" to do anything.

Is the value of Bitcoin supposed to be rising?  Why?  Right now it's successfully working as a functional currency and that's really all that matters -- people are using it.  

The value of a currency is a function of many things, primarily psychology of which demand is a derivative.  More people using --> more demand --> higher value.  There hasn't been a rapid influx of new users, but there is evidence of gradual entry.  During the months leading up to the June 2011 bubble, there was a rapid influx of new users.  This influx was due to speculation.  This brings me to another factor...

...the type of users that demand Bitcoin affect its value, especially when the market is smaller.  While we have more Bitcoin users now than we did during the time of the June 2011 bubble, users are now entering for different reasons, and these reasons determine levels of demand and types of investment.  

At the time of the bubble, there were many risky investor-types who entered the market with a shit-ton of cash on the basis of speculation.  Hence, the price went up extremely fast to a point where the market cap was around $150 million, but then it fell extremely fast.  However, today with a market cap of only ~$47 million and a price of 'only' $5, we don't see such enormous price swings, and even a 20,000 BTC sell-off by a single individual doesn't have nearly the same impact that it would have had last June.  This is a result of (mostly) two things:  1) There are more overall Bitcoin users, and 2) these users are more diverse in their reasons for investing in Bitcoin.

Actually, you could argue that, if anything, the value of a currency "struggles" to be infinitely volatile and it is up its users to harness this volatility such that it can become a stable currency and can become a storage of value.  

Now, a little speculation in the beginning is a good thing to establish some sort of initial interest, value, etc.  Right now, the Bitcoin economy is too small to reconcile a BTC price beyond $5-$10.  Actually, I think even a price at $1-2 would still be very fair at this point.  However, too much speculation is unhealthy, and there's no good reason -- speculative or otherwise -- to expect the value of BTC to immediately start soaring.

Given all the hacks, losses, scams, etc., its absolutely remarkable that Bitcoin is functioning as healthily as it is at present.

Faisal7
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June 03, 2012, 12:13:19 AM
 #12

So many words. yet nothing was said.

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the joint
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June 03, 2012, 12:14:48 AM
 #13

So many words. yet nothing was said read.

FTFY.

Faisal7
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June 03, 2012, 12:23:23 AM
 #14

So many words. yet nothing was said read.

FTFY.

the most important thing that needs to be understood about Bitcoin is this -- it's as stupid as any other currency at the end of the day.

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the joint
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June 03, 2012, 12:28:26 AM
 #15

So many words. yet nothing was said read.

FTFY.

the most important thing that needs to be understood about Bitcoin is this -- it's as stupid as any other currency at the end of the day.

Why?

And please relate Bitcoin to other currencies in your answer so I understand the "stupid" relationships.

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June 03, 2012, 01:13:47 AM
 #16

It's because bitcoin's doesn't have a unique function/feature that fulfills a particular niche.

The pseudo-anonymity is nice, the decentralized nature is nice... but neither is strong enough.

Bitcoin needs a specific, core area that it performs better in than any other currency at present.
BCMan
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June 03, 2012, 01:52:43 AM
 #17

It's because bitcoin's doesn't have a unique function/feature that fulfills a particular niche.

The pseudo-anonymity is nice, the decentralized nature is nice... but neither is strong enough.

Bitcoin needs a specific, core area that it performs better in than any other currency at present.
Silkroad?  Roll Eyes

Phinnaeus Gage
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June 03, 2012, 02:38:08 AM
 #18

Well, one reason may be that the value of a currency doesn't "struggle" to do anything.

Is the value of Bitcoin supposed to be rising?  Why?  Right now it's successfully working as a functional currency and that's really all that matters -- people are using it.  

The value of a currency is a function of many things, primarily psychology of which demand is a derivative.  More people using --> more demand --> higher value.  There hasn't been a rapid influx of new users, but there is evidence of gradual entry.  During the months leading up to the June 2011 bubble, there was a rapid influx of new users.  This influx was due to speculation.  This brings me to another factor...

...the type of users that demand Bitcoin affect its value, especially when the market is smaller.  While we have more Bitcoin users now than we did during the time of the June 2011 bubble, users are now entering for different reasons, and these reasons determine levels of demand and types of investment.  

At the time of the bubble, there were many risky investor-types who entered the market with a shit-ton of cash on the basis of speculation.  Hence, the price went up extremely fast to a point where the market cap was around $150 million, but then it fell extremely fast.  However, today with a market cap of only ~$47 million and a price of 'only' $5, we don't see such enormous price swings, and even a 20,000 BTC sell-off by a single individual doesn't have nearly the same impact that it would have had last June.  This is a result of (mostly) two things:  1) There are more overall Bitcoin users, and 2) these users are more diverse in their reasons for investing in Bitcoin.

Actually, you could argue that, if anything, the value of a currency "struggles" to be infinitely volatile and it is up its users to harness this volatility such that it can become a stable currency and can become a storage of value.  

Now, a little speculation in the beginning is a good thing to establish some sort of initial interest, value, etc.  Right now, the Bitcoin economy is too small to reconcile a BTC price beyond $5-$10.  Actually, I think even a price at $1-2 would still be very fair at this point.  However, too much speculation is unhealthy, and there's no good reason -- speculative or otherwise -- to expect the value of BTC to immediately start soaring.

Given all the hacks, losses, scams, etc., its absolutely remarkable that Bitcoin is functioning as healthily as it is at present.

+1

Please remind me when we do lunch/dinner to only talk about barn wood, otherwise I'm goin' to look pretty damn stupid. Strike that, for I already look pretty damn stupid, so why would I couple that effect my coming across as one as well?

~Bruno~
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June 03, 2012, 02:40:08 AM
 #19

So many words. yet nothing was said read.

FTFY.

the most important thing that needs to be understood about Bitcoin is this -- it's as stupid as any other currency at the end of the day.

You think it's stupid to have a unique token that represents value? Why have social groups been remaking currencies since the beginning of time then? Or why are IOUs so ubiquitous across cultures? It has to be to fill some needs like the ability to share a basis point of value and simplify transactions perhaps; You no longer need to know how many eggs for a chicken, or how many chickens for a pig, or etc ad infinitum, just how many of whatever the currency is?

To be clear I'm arguing from a number of perspectives here:
a) Some currencies are better than others and
b) Having any currency is likely better than none and finally
c) It's easier to carry a pocket-full of cash or a smartphone into a shop than a bushel of bacon.

Why do you think currencies are stupid and I won't accept that you're a troll as the answer?

It was a cunning plan to have the funny man be the money fan of the punning clan.
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Faisal7
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June 03, 2012, 04:45:49 AM
 #20

So many words. yet nothing was said read.

FTFY.

the most important thing that needs to be understood about Bitcoin is this -- it's as stupid as any other currency at the end of the day.

You think it's stupid to have a unique token that represents value? Why have social groups been remaking currencies since the beginning of time then? Or why are IOUs so ubiquitous across cultures? It has to be to fill some needs like the ability to share a basis point of value and simplify transactions perhaps; You no longer need to know how many eggs for a chicken, or how many chickens for a pig, or etc ad infinitum, just how many of whatever the currency is?

To be clear I'm arguing from a number of perspectives here:
a) Some currencies are better than others and
b) Having any currency is likely better than none and finally
c) It's easier to carry a pocket-full of cash or a smartphone into a shop than a bushel of bacon.

Why do you think currencies are stupid and I won't accept that you're a troll as the answer?

I don't care what you accept. That's the point.

You're a complete and total loser whether it's US dollars, or your cryptocurrency. That's the thing buddy. No one fucking cares.

Life is more than your little monopoly games and gimmicks. Fuck you if you think this stupid cryptocurrency is really revolutionary. It's impractical, it's not intuitive, and most importantly there is no way to earn these stupid things even if it was so great. Only nerds with absurd hashing power get these dumb little coins. So freaking retarded. and the more people criticize you, the more you gain steam it seems. That's fine too. I mean, if you really believe in these things I'll be glad to knock this Bitcoin scam until the value rises to $50 USD per coin. Why not? I mean I'll be like you, build a mining rig or buy an ASIC even, and convert all my coins to USD. But I will be laughing to the bank if that ever happens.. I'm 100% sure it won't. Your bit currency is junk just like your soul.

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