Why Bitcoin is bad for business ( true story, explained on details )

[0x54444e]

http://np.reddit.com/r/explainlikeimfive/comments/2sqiww/eli5_why_did_swiss_central_bank_get_rid_of/

TLDR :

EDIT 2: A few bitcoin evangelists are coming by. Since our biggest headache is instability in the currency values and rapid appreciation, I would like to point you to the following plot, which shows the CHF-USD rate and the BTC-USD rate on the same graph:
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1421585015744&chddm=845536&cmpto=CURRENCY:BTCUSD&cmptdms=0&q=CURRENCY:CHFUSD&ntsp=0&ei=VKq7VPmoD-vCwAPG7oHADQ
Bitcoin is not a better answer here. Being a deflationary currency is bad for business, being an unstable currency is also. Bitcoin is, by design, both.

[Meuh6879]

Being a deflationary currency is bad for business

inflation KILL people.

[Bitcoinpro]

manufacturing in these economies was dead 20 years ago

the Swiss central bank decided to stop trying to kick a can

that probably had stopped rolling anyway

[Flashman]

Leverage created more of a problem in the Swiss Franc situation though. Since a big move in conventional FOREX markets is a couple of percentage POINTS, i.e. fractions of a percent, the leverage allowed is huge, like 30x or so, whereas in bitcoin markets leverage is available but much smaller. I think BTCe only offers 4x leverage, so when BTC drops 30%, you get an effective 120% disparity to cover, but when swiss franc moves 10% with 30x leverage, it's a 300% loss to cover for some. And since national currencies are considered very low volatility, and the swiss franc "as good as gold" there were hundreds of  millions parked in it, with the expectation that the risk profile was low, then shorting it was only considered maybe medium risk... so your medium risk investment, of your many millions, suddenly ends up with a 300% margin call.... that is not a good day.

[0x54444e]

Leverage created more of a problem in the Swiss Franc situation though. Since a big move in conventional FOREX markets is a couple of percentage POINTS, i.e. fractions of a percent, the leverage allowed is huge, like 30x or so, whereas in bitcoin markets leverage is available but much smaller. I think BTCe only offers 4x leverage, so when BTC drops 30%, you get an effective 120% disparity to cover, but when swiss franc moves 10% with 30x leverage, it's a 300% loss to cover for some. And since national currencies are considered very low volatility, and the swiss franc "as good as gold" there were hundreds of  millions parked in it, with the expectation that the risk profile was low, then shorting it was only considered maybe medium risk... so your medium risk investment, of your many millions, suddenly ends up with a 300% margin call.... that is not a good day.

You are missing one point

1 BTC = 215 USD
1 CHF ( swiss franc ) = 1.16 USD

so the 30% drop or increase it's really BIG compared with eachother, so bitcoin is a LOT more volatile than any other currency.

[Kazimir]

Yeah, whatever. This is relevant only if you keep measuring Bitcoins or Swiss Francs in USD. It's a matter of time before the USD will no longer be relevant. The whole USD system is rotten from the inside out, the only 'solution' they can think of is always printing more money.



I agree that Bitcoin is still unstable (which isn't good) but hey, it's still in it's infancy, this is to be expected. Bitcoin will stabilize in due time.

Being a deflationary currency is bad for business,

A common misconception. The obvious reasoning is something along the lines of: people will keep their money in their pockets if it's worth more next month. In practice, however, they don't. They need food, rent, cars, gas, paying taxes, holidays, insurance, internet, mobile phones, and tons of other products and services NOW, not next month.

For the VAST majority of consumer spending, buying or paying next month instead of now is simply not a consideration whatsoever.

[Flashman]

Leverage created more of a problem in the Swiss Franc situation though. Since a big move in conventional FOREX markets is a couple of percentage POINTS, i.e. fractions of a percent, the leverage allowed is huge, like 30x or so, whereas in bitcoin markets leverage is available but much smaller. I think BTCe only offers 4x leverage, so when BTC drops 30%, you get an effective 120% disparity to cover, but when swiss franc moves 10% with 30x leverage, it's a 300% loss to cover for some. And since national currencies are considered very low volatility, and the swiss franc "as good as gold" there were hundreds of  millions parked in it, with the expectation that the risk profile was low, then shorting it was only considered maybe medium risk... so your medium risk investment, of your many millions, suddenly ends up with a 300% margin call.... that is not a good day.

You are missing one point

1 BTC = 215 USD
1 CHF ( swiss franc ) = 1.16 USD

so the 30% drop or increase it's really BIG compared with eachother, so bitcoin is a LOT more volatile than any other currency.

You're missing the point that 10% variation in the Swiss franc did a lot more "damage" than 30% swing in bitcoin, due to one being expected to be volatile and the other not. In effect, maximum losses on 30% swing of BTC were ~120%, maximum losses on Swiss Franc were ~300%. IF you're going to point to which one is worse for business, look at the bigger amount of "damage" because export and import firms hedge against exchange variations, and if hedging has snowballed like that and cost them most of their profit for the year, it's baaad mmmkay.

[mayax]

Leverage created more of a problem in the Swiss Franc situation though. Since a big move in conventional FOREX markets is a couple of percentage POINTS, i.e. fractions of a percent, the leverage allowed is huge, like 30x or so, whereas in bitcoin markets leverage is available but much smaller. I think BTCe only offers 4x leverage, so when BTC drops 30%, you get an effective 120% disparity to cover, but when swiss franc moves 10% with 30x leverage, it's a 300% loss to cover for some. And since national currencies are considered very low volatility, and the swiss franc "as good as gold" there were hundreds of  millions parked in it, with the expectation that the risk profile was low, then shorting it was only considered maybe medium risk... so your medium risk investment, of your many millions, suddenly ends up with a 300% margin call.... that is not a good day.

You are missing one point

1 BTC = 215 USD
1 CHF ( swiss franc ) = 1.16 USD

so the 30% drop or increase it's really BIG compared with eachother, so bitcoin is a LOT more volatile than any other currency.

You're missing the point that 10% variation in the Swiss franc did a lot more "damage" than 30% swing in bitcoin, due to one being expected to be volatile and the other not. In effect, maximum losses on 30% swing of BTC were ~120%, maximum losses on Swiss Franc were ~300%. IF you're going to point to which one is worse for business, look at the bigger amount of "damage" because export and import firms hedge against exchange variations, and if hedging has snowballed like that and cost them most of their profit for the year, it's baaad mmmkay.

How can you compare a shit like Bitcoin with Swiss franc?  hahaha

Bitcoin = up to 1 MIL users, half of them are on this forum )

How can someone compare a real economy with a shit bubble Bitcoin? you must be...pffff  

Bitcoin has nothing to do with any economy. Bitcoin is based on black market and speculators. There is no Bitcoin economy.

You remember me of PicPay retards who said the same things as you. Picpay economy, Picpay to the moon LOL... hahaha
Many of you were not born in 2003 when PicPay was on wave. Same mentality as on this forum. Btw, they had a forum too where everybody made plans how rich will be soon  LOL

[Kazimir]

How can you compare a shit like Bitcoin with Swiss franc?  hahaha

Bitcoin = up to 1 MIL users, half of them are on this forum )

How can someone compare a real economy with a shit bubble Bitcoin? you must be...pffff  

Bitcoin has nothing to do with any economy. Bitcoin is based on black market and speculators. There is no Bitcoin economy.

You remember me of PicPay retards who said the same things as you. Picpay economy, Picpay to the moon LOL... hahaha
Many of you were not born in 2003 when PicPay was on wave. Same mentality as on this forum. Btw, they had a forum too where everybody made plans how rich will be soon  LOL

Similar guy in 1994: "How can you compare internet with REAL business and communication? There's like 1 MIL geeks calling themselves 'online', sending their precious 'emails' (some kind of virtual cyber postal service), it's just a shit bubble!"

Oh, and if you are seriously comparing PicPay to Bitcoin, you really miss the point.

[ujka]

Being a deflationary currency is bad for business,

A common misconception. The obvious reasoning is something along the lines of: people will keep their money in their pockets if it's worth more next month. In practice, however, they don't. They need food, rent, cars, gas, paying taxes, holidays, insurance, internet, mobile phones, and tons of other products and services NOW, not next month.

True. Just look at IT industry, or mobile phone, tablet... they are under deflationary economic all the time, and are doing great. Great competition, better products, better prices for consumers...

Banking industry needs that kind of competition.