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Author Topic: Potential problem with Bitcoin investments  (Read 2978 times)
Anders
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May 24, 2011, 03:30:23 PM
 #21

Another potential problem is that hoarding bitcoins for long-term investment is so attractive that the flow of bitcoins becomes clogged up with very few people actually willing to use their bitcoins since the long-term investment prospect is so formidable.

Early on the cost of one bitcoin was 1 dollar. Today it's around $7 if I remember correctly. In the future, with billions of users, the price of a single bitcoin could be $100,000! Grin So people today may want to hoard bitcoins like crazy.

It certainly has an effect but in my opinion it's not as dangerous as it seems. When the BTC exchange value goes up, you can consolidate your profits by spending your money. That happened to me many times, the offers become more and more irresistable. You don't know if the value will go higher, maybe the market will crash soon. On the other hand, you can buy that diamond necklace with the bitcoins you've bought for only 100 bucks. Save some, spend some. At best, the deflation will make people more careful with their expenditures.

Good point. And in the early stages people willing to risk investing in bitcoins are worth the reward if Bitcoin becomes popular. I myself like the zero risk approach. He he. The long-term situation may look different. I haven't studied the concept much yet (I became aware of Bitcoin today) so there may exist some calculations about what will happen after all bitcoins have been generated.
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Anders
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May 24, 2011, 06:43:15 PM
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Holy crock! I came to think about something. It probably has been discussed before, but what would happen if the real financial investors started investing in bitcoins? Shocked The price could go straight through the roof! I'm thinking about the huge investors who make $billion deals every day.
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May 24, 2011, 08:26:56 PM
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Holy crock! I came to think about something. It probably has been discussed before, but what would happen if the real financial investors started investing in bitcoins? Shocked The price could go straight through the roof! I'm thinking about the huge investors who make $billion deals every day.
Yep, if people buy lots of bitcoins with dollars the exchange rate will rise. It's a feature not a bug. Wink
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May 24, 2011, 09:36:07 PM
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Holy crock! I came to think about something. It probably has been discussed before, but what would happen if the real financial investors started investing in bitcoins? Shocked The price could go straight through the roof! I'm thinking about the huge investors who make $billion deals every day.
Yep, if people buy lots of bitcoins with dollars the exchange rate will rise. It's a feature not a bug. Wink

One interesting thing is that investors are often willing to take very high risks. Venture capital for example is high risk investments. Bitcoin is probably less risky than many startup companies as an investment. A big obstacle however could be legal aspects of Bitcoin. If the big companies' lawyers cannot guarantee that the investment is fully legal, then that may prevent large investors from investing in Bitcoin.
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