Price Matters... And Here's Why

[ranlo]

I keep hearing over and over that price doesn't matter on Bitcoin. The general idea behind that is that "it's a method of transferring funds, so whether it's $1 or $1m, it still serves its purpose." This is flawed. Here's why:

1) As long as it keeps going through swings up and down, it's difficult to use it solely as a way to transfer funds. I buy $100 worth now to send my friend so he can cash it out real quick for $100, only to find that in the 10 minutes it took me to send it to him, it's now only worth $85. Now I'm $15 short. So either I have to over-buy or deal with the constant fluctuations.

2) The fluctuations are causing a lot of holders and speculators. By the very nature of this, they are like stocks and will fluctuate up and down, preventing #1 from being fixed.

3) The price is going to be altered according to how much money comes in and out of the system. If people use it solely as an intermediary between fiat and fiat, the same amount would need to go in as goes out on a daily basis to keep things steady. With Bitcoin's low market cap ($10b or whatever it is right now isn't even that much considered to a lot of businesses), this is too easy to manipulate even if it was being used as many feel it's intended to be used like.

4) The fix to #3 is to raise the price up. The higher the price is, the harder it is to manipulate. If I have $1m and the cap is $100m, I have a lot more power than if I have $1m and the cap is $100b. The latter is like a drop in the bucket.

Basically what all this leads to, from a strict economic point, is that the price has to go up for Bitcoin to be used like everyone wants it to be. And then it has to stabilize. The lower it gets, the easier it is to swing up and down. This is why price matters.

Please feel free to dispute this with me if you want. I'd love to hear your takes on it. After following the market, events, etc. for quite a while now, though, this was my conclusion. Do note, though, that I am in NO way saying that Bitcoin shouldn't be used as a currency, and in fact I do agree with that. But the current market doesn't support that.

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[BreathOfZen]

Everyone knows that price matters, the only people trying to fight it are those who are trying to avoid admitting that Bitcoin is in an extreme crisis right now that calls for mindful actions.

[haploid23]

I generally agree with all of that. But why I personally think price is the biggest determinant is because high price is what's attracting the average joe, not the technical aspect of bitcoin. Price has a larger impact on headlines than any other characteristics of bitcoin.

[ranlo]

I generally agree with all of that. But why I personally think price is the biggest determinant is because high price is what's attracting the average joe, not the technical aspect of bitcoin. Price has a larger impact on headlines than any other characteristics of bitcoin.

Which is kind of a huge issue we're facing. For the price to go up, we need more people. But people put money into it because they want to make money and get rich. It leads us to the perpetual cycle we've been in for a while now. Something big has to occur to break us out of this. Basically we need MORE money dumped in but NOT as a way to get rich and dump, but rather as a way to create a sustainable economy. If I buy in at $1 and dump at $1200, I helped grow it and then helped dump it back down, causing a net effect of zero on my own part.

[risebtc]

Anyone else think a lower price is going to spread adoption more. No one wants to buy high & there are plenty of Newbies like me ready to catch some sub $200 coins we could have a more natural growth after this. Bitcoin will be well over 1000 near the end of 2015 when it's more widespread.

[ranlo]

Anyone else think a lower price is going to spread adoption more. No one wants to buy high & there are plenty of Newbies like me ready to catch some sub $200 coins we could have a more natural growth after this. Bitcoin will be well over 1000 near the end of 2015 when it's more widespread.

As price goes down we lose more and more existing users. This is actually detrimental to the overall growth. There are already far too many stories about hacks and scams, with one site after another being included. Anyone I've talked to about BTC just refers to the numerous articles that show how insecure it is (with things like Mt. Gox, Bitstamp, etc. on the list) and how they would never put a cent into a dying system.

[odolvlobo]

#1. You are talking about volatility, not price. If the price is steady at $1, it does not have the problems you describe.

#2. As volatility attracts more speculators, the price will become less volatile.

#3. Market cap is not the same as price.

#4. Again, market cap is not the same as price. We could raise the price by cutting the number of bitcoins, but that would not solve anything.

[haploid23]

Which is kind of a huge issue we're facing. For the price to go up, we need more people. But people put money into it because they want to make money and get rich. It leads us to the perpetual cycle we've been in for a while now. Something big has to occur to break us out of this. Basically we need MORE money dumped in but NOT as a way to get rich and dump, but rather as a way to create a sustainable economy. If I buy in at $1 and dump at $1200, I helped grow it and then helped dump it back down, causing a net effect of zero on my own part.

Yes, but every time there is a hike and crash, there is also more publicity. Any publicity is good publicity. Give it time for adoption to have a more natural growth. It has only been 5 years. Do you think any other currency had this quick of a boom in its early days?

[ranlo]

#1. You are talking about volatility, not price. If the price is steady at $1, it does not have the problems you describe.

#2. As volatility attracts more speculators, the price will become less volatile.

#3. Market cap is not the same as price.

#4. Again, market cap is not the same as price. We could raise the price by cutting the number of bitcoins, but that would not solve anything.

If the price is $1, it's going to be volatile. Speculation ensures this is the case. The only way around it would be a centralized agency, and then we run into centralization. Plus people would create an alt market where they sell cheaper anyways.

Price and volatility with Bitcoin are directly related. As long as it's cheap enough for manipulation to occur, it's going to happen. That's an inevitable part of the currency. Market cap deals with the price because coins are being created at a constant rate. If each coin is $1 and 25 coins are added, $25 has to be added to the market to sustain it. Otherwise each coin just got devalued. i.e., 100 coins at $100 total = $1 each. Add 100 coins and now there's still just $100 so $100/200=$0.50. Basic economics.

[ranlo]

Which is kind of a huge issue we're facing. For the price to go up, we need more people. But people put money into it because they want to make money and get rich. It leads us to the perpetual cycle we've been in for a while now. Something big has to occur to break us out of this. Basically we need MORE money dumped in but NOT as a way to get rich and dump, but rather as a way to create a sustainable economy. If I buy in at $1 and dump at $1200, I helped grow it and then helped dump it back down, causing a net effect of zero on my own part.

Yes, but every time there is a hike and crash, there is also more publicity. Any publicity is good publicity. Give it time for adoption to have a more natural growth. It has only been 5 years. Do you think any other currency had this quick of a boom in its early days?

Look at how many people (protip: a TON) still don't mess with smart phones and only know basics about computers. Cryptos are FAR beyond their time right now. You can rarely even toss around "Windows tablet" without people confused about how it has Windows when they only come in Android.

[freedombit]

What's the rush?

Give it some time.

If you're worried that you're going to lose some cash, just take a quick look at the volumes on MtGox prior to the implosion, current volumes on Bitfinex and Bitstamp, and most important, current volumes at BTC China:

http://www.bitcoincharts.com/charts/mtgoxUSD#rg730ztgSzm1g10zm2g25zv

http://www.bitcoincharts.com/charts/bitfinexUSD#rg730ztgSzm1g10zm2g25zv

http://www.bitcoincharts.com/charts/bitstampUSD#rg730ztgSzm1g10zm2g25zv

http://www.bitcoincharts.com/charts/btcnCNY#rg730ztgSzm1g10zm2g25zv

There is a lot of unleashed demand for freedom in East Asia.

:-)

[ranlo]

What's the rush?

Give it some time.

If you're worried that you're going to lose some cash, just take a quick look at the volumes on MtGox prior to the implosion, current volumes on Bitfinex and Bitstamp, and most important, current volumes at BTC China:

http://www.bitcoincharts.com/charts/mtgoxUSD#rg730ztgSzm1g10zm2g25zv

http://www.bitcoincharts.com/charts/bitfinexUSD#rg730ztgSzm1g10zm2g25zv

http://www.bitcoincharts.com/charts/bitstampUSD#rg730ztgSzm1g10zm2g25zv

http://www.bitcoincharts.com/charts/btcnCNY#rg730ztgSzm1g10zm2g25zv

There is a lot of unleashed demand for freedom in East Asia.

:-)

It's not so much about the rush... it's more that this is a niche market. People are blindly refusing to accept the truth. The more these things continue to happen, the smaller the market will become. Most of the new additions (in Bitcoin) revolve around dumping coins on to the market. Places like BitPay only serve as a middleman that dumps coins, for example. I do feel that there are some alts that have a lot of promise.

Basically it all revolves around the fact that people are blindly refusing to accept the fact that these events that are recurring are NOT helping and are making things worse. And this is coming from a holder that refused to dump at 1200 and still refuses today. With that said, I'm not naive enough to think that these things happening over and over are going to magically make Bitcoin successful. They aren't. Things have to change. That's an absolute must. And a huge part of this, if we want MAJOR adoption, is to create a system where someone's grandma can use Bitcoin. Someone that doesn't even know how to use a smart phone. Because in the real world, the vast majority of people (and that includes young people) don't know the first thing about this stuff. And until we can cater to them (which companies like Apple and Microsoft have been trying to do for many, many years now), we're going to be stuck in this rut.

[odolvlobo]

I generally agree with all of that. But why I personally think price is the biggest determinant is because high price is what's attracting the average joe, not the technical aspect of bitcoin. Price has a larger impact on headlines than any other characteristics of bitcoin.

That kind of thinking is what causes bubbles. It is not sustainable and it is not beneficial to Bitcoin. The value of Bitcoin lies only in its usage and its utility. If usage and utility of Bitcoin grows, everything else (including price will follow). If usage and utility go to 0, then so will the price.

[ranlo]

I generally agree with all of that. But why I personally think price is the biggest determinant is because high price is what's attracting the average joe, not the technical aspect of bitcoin. Price has a larger impact on headlines than any other characteristics of bitcoin.

That kind of thinking is what causes bubbles. It is not sustainable and it is not beneficial to Bitcoin. The value of Bitcoin lies only in its usage and its utility. If usage and utility of Bitcoin grows, everything else (including price will follow). If usage and utility go to 0, then so will the price.

Bubbles are somewhat what caused me to write this. We'd be better off if Bitcoin had hit $5 and stayed at $5 than it hitting 60, then 1200 and then crashing. Each time it drops, people are losing. And people that have lost this much are far less likely to ever continue on as a result. Hemorrhaging people in a niche market is always a bad thing. But for whatever reason, most people seem to not understand that. Bitcoin is basically a business. If it's not treated like one it's going to crash. It really is that simple. Pissing off customers (i.e., crashing their investments) leads to a loss of business, which ultimately leads to the business' demise.

[Net5kY]

I think bitcoin will a)collapse b)raise even more than before.
Question is who and for what reason sell big amount of coins at the same time, if effects of this move is obvious

[raja2sumi]

Yess price do really matters at all .here u see the price of bitcoins have reached 964 dollars and it has reached new heights .it is likely to reach more and by the end of 22 nd century it will reach 60k dollars .

[Seansky]

I agree with OP that price matters with bitcoin. In addition to what he said price is also relevant to attract more users and companies that will accept it. Companies won't accept it if they know that it's price if low and also it got that cap that factors it. Also like he said fluctuations cause more holders and speculators that also attract others to do business with bitcoin offering their services and also exchangers and altcoin's booming because of bitcoin's price that attracts more investors particularly the ones who are investing in the stock market.

[machinek20]

Of course the price matters, one of the reason people interested in bitcoin because the price is keep on rising and it is very valuable, that is why bitcoin being used for trading and currency, it is impossible people will interested if the coin got no value

[A.M.]

Yess price do really matters at all .here u see the price of bitcoins have reached 964 dollars and it has reached new heights .it is likely to reach more and by the end of 22 nd century it will reach 60k dollars .

You found a thread 2 years old to bump. How? It doesn't matter where it ends up as long as it gets there and becomes stable in the future which it should do once the market cap has got to the point it is then hard to manipulate compared to how easy it is now. Not to say it won't be, because it will. Just harder to do.

[ranlo]

Of course the price matters, one of the reason people interested in bitcoin because the price is keep on rising and it is very valuable, that is why bitcoin being used for trading and currency, it is impossible people will interested if the coin got no value

This thread was resurrected from long ago, but it was posted because at that point in time, the general consensus was that the price of BTC was completely irrelevant since it's a "currency" and not a store of value (therefore, if you want to send $100, it doesn't matter if it's worth 0.01 or 1000 BTC since all you're doing is fiat <--> BTC anyways). It was to help set people straight on the proper way to look at it.