Topic: Bitcoin the Bubblecoin - page 2. (Read 5411 times)

"Monetary devaluation" or decreasing the value of a money (price inflation) is the same thing as making and circulating more of it. It is a moronic tactic used by Tory-Bilderberg Trotskyite Mensheviks to foolishly attempt to prod growth by monetizing slaves debts that you are too greedy and evil to forgive. It only results in making bond loans even more worthless than the debt liabilities they back.

"Monetary revaluation" (seldom heard-of as in 1973 Bretton Woods) or increasing the value of a "limited commodity" foolishly used as money is the same thing as reducing/monopolizing it's supply or a "Gold Standard" doomed to shrink until fraudulent rented-Receipts For It Notes must be used to replace it (1913), then leading to rented They-Owe-Us Notes backed by "bond" debt-slavery pledges to it's former value (1973).

"Monetary iValuation" is the BTCitcoin free market system, where monetary supply and demand determine an ever naturally increasing valuation that profits all who own it and automatically remains "price-inflation neutral" regardless of growth without central control.

The solution is childsplay but first you have to understand the essentials:


About Bitcoin:

A Bitcoin is a commercial "over the counter (OTC) derivative" of the current-past value and future possible values of itself and it's network, which are only (at best) completely deregulated commercial resources, and neither "commodity futures" nor "securities" as per the CFMA of 2000. This is why, with it's "penny-stock market" exchange-value changing every 15 seconds, it is useless as a "money" because you need an hour to accept and/or spend it, and never really[/] know what it will be worth come (future) selling time. It's current wildly unstable, disparate and volatile exchange-values are really only very useful as a delayed-exchange "funding" funded-swap medium.

The "exchange-value" (price) inflation and deflation of Fiat Bitcoins has squat to do with any "monetary supply" of them and (foreseeably) never, ever will!

Market speculators and their fiat-antics capriciously determine the latest (stale) fiat exchange-value of the last fiat Bitcoin that past their way.

The actual "price" of any given Bitcoin remains forever unknown and unknowable until after it has been re-sold (re-exchange valued) to the next guy, in the future.

The best way to think of the exchange-value of Bitcoins is as a kind of a "virtual toilet" which, regardless of what has been dumped through it, only bears the memory-value of the position that it's last user left the seat in, to it's own current owner, alone. Bitcoin functions exactly in much the same way as a "funded" Credit Default Swap (fCDS). You fund it's former owner's "loss" (costs) on it, and the next owner funds yours.

This and it's other features make it ideal as a delayed patient "credit swap" Medium of Exchange between two sophisticated parties, but other factors make it a totally or nearly useless commercial Medium of Labour Exchange Currency like other stable, dependable and reliably valued things that "currently" serve that purpose.

The way BTC is kicked around by it's bone-headed "exchangers" as if it were "somebody else's" trashy penny stock, it will never be stably valued enough to be considered as a competitive Medium of Labour Exchange "currency" by anyone who might wish to contract, conduct business nor any serious large or long-term transactions in it. (let alone loan it  LOL)

The stupid Bitcoin "penny stock market" Exchangers


Well this is the whole deal. Certainly it has to always continue to rise in value or "gradually deflate" (simply our profits or "interest" for adopting and spreading the adoption and wider use, ever-more widely of our "money") but we can't ever be pleased to see it inflate,(devalued) such that we all lose!!

So not only should those "$5 Bitcoin Pharaohs" who have profited most immensely from it be eager to support it, but our exchanges have to stop thinking like penny-stock markets, by actually assisting speculators to long and short it excessively without any sturdy disincentives to deter or make such deliberately mischievous attacks upon our currencies value unprofitable.

Exchangers: It's not like you don't know what's going on when you see the same fat wallet speculative traders high frequency bidding your basis up with low volume spread price "egg-on" buy/sell orders. By permitting out of range bids to execute at the same cost as rational fair bargaining bids (for more patient bargain seekers) a single player can rapidly bid the price through 20-30% by burning through as little as a hundred bucks, then buy or sell his thousands into it, causing scary and catastrophic volatilities to be triggered.

So really it's quite a simple and automatic dampening system you need like an "arithmetic shock absorber". There are two things you have to control, the number of and value-levels of (valid, permissible) bid/ask slots about the "current basis", and a progressive scale of "trading slot fees"(for them) that increase exponentially the further they deviate from the "current basis" value.

Of course you may need to keep (out of range) buy-limits there too,(without fee penalty) for support.

The number of buyers or sellers are irrelevant, only their positions their goals and the weights of their wallets are.

Usually sellers sell at the buy price and buyers buy at the sell price but often the buyers go short and the sellers go long, to "bargain".

Eventually an impatient buyer must go long enough to get a buy or an impatient seller must go short enough to make a sale, especially if a larger quantity is involved.

Those two smallish "bridging a spread" labours capriciously move the last market price (spread bounds range limits) up or down, over-valueing or devaluing the pretend "currency" like a hooked swordfish but that is not the real problem.

Any larger transactor (who we desperately want and need more of like big retailers) who must obtain or clear large amounts is always forced to very painfully suffer a much lower or higher than market price, (vaulting the spreads) and the larger the quantities, the bigger those (nasty) spreads get and remain, left behind them. It's not like they can go to a flush "money-changer" and buy or sell the particular given price.

They have to go into the "penny-stock exchanges" penny-order book and find a bid that will get them all the cash or BTC they need to transact.

In fact the critical challenge to Bitcoin transactions other than a stable price, is the actually practical value of liquidity a given transactor can move through an exchange at or around a given price within a practical period of time, which argues for a much, much more highly valued Bitcoin (eg $1,000-$10,000-$100,000), specific pre-determined bid-rung levels about the "current median-basis price" with exponentially higher fee punishments for further out of bounds bids, and for tighter daily transaction frequency limits also punished by exponentially higher fees.

 

So you accomplish three goals; making simple exchanges at current value the "cheapest fee trades", and you make wildly out of range bids or asks that may stampede the market in either direction costly to place the further they go, you keep bids and asks within a given "basis-centric" range and ladder, while you still preserve "support level" bids.

The way I see it is as an automatic mathematically derived dampening mechanism that (profitably for the exchanges and us all) simply impedes upwards bubbles, and large gulfs in ongoing median trading prices, by tweaking, rather than breaking the laws of (monetary) supply and demand.

Imagine if your friend had invested two years ago.

Oh, it'll stabilize eventually. And one of the big factors that will contribute is something that the libertarian crypto-anarchists will hate - the traditional banking institutions. Simply put, institutions move slower (technically, their holdings have lower velocity). Hence, participation in bubbles and crashes will slow commensurately as more money total is involved. Yes, there will still be bubbles and crashes (just as there are with stocks, gold, USD, etc). But no, we won't see as many 40%+ moves in the future, simply because of greater (and slower) participation.

When I price a steak in chicken wing, then it becomes relatively stable.

Bitcoin will eventually become less volatile. The market is still very small and relatively small influxes of money can be very large compared to the market value of the coins in circulation. It's still a very young baby, don't forget that.

Even gold and silver can be manipulated into huge bubbles. Bitcoin may or may not be able to be leveraged via passthrus or derivatives, but there will always be attempts to create fraudulent investment vehicles that undermine faith in Bitcoin as a store of value. Currently I believe that exchanges may be doing this now. I want to believe that large numbers are enough to peg Bitcoin's value to the general commodities indexes. It's just that Bitcoin isn't a commodity. Perhaps Bitcoin can become bigger than gold, but because it isn't physical, it may never be trusted enough to get there. It just seems that there is more we can do to make it better than gold.

From: http://en.wikipedia.org/wiki/Silver_Thursday

Larger, deeper markets reduce volatility.  It occurs in every single free (or relatively free) market since humans began trading things.

Take a look at the volatility of Silver and Gold for example.  While both are more stable (relative to USD) than Bitcoin, Silver is much more volatile then its golden brother. 

Valuation of Bitcoin: ~$1B
Valuation of Silver:  ~$30B
Valuation of Gold: ~$7,000B

When it takes $1B or more to move the exchange rate 1% either way (like it does for Gold) you will not see 50% daily volatility. 

Another way to look at it is the total volume traded on the four largest BTC:USD exchanges is ~$6B annually.  The world GDP is ~$70T annually.  To keep the major currencies with relatively low volume how much forex volume do you think it takes?  Would $70T seem like a lot? Annual forex trade volume is on the order of $250T annually (yes 4x to 5x global GDP).

As markets grow so does price stability, especially when supply is reliable, this shouldn't need a great deal of explanation to understand. As for pumping and dumping that becomes practically impossible in large markets. Consider how much wealth you would need to command in order to pump and dump the gold market or the oil market, "pumping and dumping" those markets is a sure way to lose money. Read in to the concept of "demand to hold" by owners of commodities, it's a natural practice by market participants. The volume of commodities that will enter the market during a price rise because of the total "demand to hold" is very significant and all but negates artificially "pumping" a large market. Not to mention pumping and dumping is not a guaranteed method of earning profits, most people that attempt market manipulating schemes end up spending more than they recoup.

There's simply no way to artificially stabilize the volatility of BTC, its value derives from the subjective valuations of participants in the BTC market.

I understand the argument, but it is still guesswork at best. You presume you are the shark. It's very similar to people that believe they have a system for the casino. What happens when your strategy of absorbing the falling prices doesn't stop the drop? Will you become a panic seller? Will other sharks try to trick you into that? Maybe you overestimated the top and underestimated the bottom. Fortunately, their is a bottom stop gap with the difficulty factor and its affect on mining cost. But that only limits new coins generated.

Besides, I'm not really talking about exchange price here. I'm talking about the running average used by commerce. I don't trust centralized exchanges to report these API prices, nor do I trust their exchange practices. Meh, I guess most people will always believe in invisible hands without a spec of evidence.

Its quite simple. The price is moved by market orders. If a panic sell event is induced by the "evil forces [TM]" then there is a certain amount of volume created by the panic sellers, only that volume is available to move the market, the panic sellers just don't have any more coins to sell than that. If I am the only shark in the pool surrounded by panic sellers I can estimate where to put my buy limits to get maximumm profit from that events, the lower it would drop, the more profit I can make but it is limited by how much is dumped, i can only make so much money from that one event and not more. If there are other sharks beside me then I have to share my profit with them, they will try to front-run my orders and get their share of profit and I will make less because only a finite amount of coins is dumped and we all try to buy some of them. There will be more buy orers competing with each other, absorbing the falling coins, slowing down the move, catching it earlier. The more buy limits there are competing with each other for dumped coins from the panic sellers the less it will drop. The more people start using the same strategy of catching the falling coin a little bit earlier than all the rest of the sharks the fewer it will be able to drop before it is completely absorbed and the more limit orders exist in the book to profit from huge price moves the more expensive it will become to induce such price moves.

How will it stabilize? Where is your evidence about limited volatility, do you mean less than 100%? I understand that you try to guess at the price changes to make money, but so does everyone else. Can you point to a mathematical theory that supports the idea that speculation stabilizes price?

The market is the stabilizing factor. You don't need to plan it, it will just happen. After realizing that there is a huge profit opportunity I have written a bot that will exploit it and extract volatility from the market and convert it into profit for me. Others will do the same. Since there is only a finite amount of volatility the more people are extracting and converting it the fewer volatility will remain.

I've been talking about this since I called it Pricecoin. Back then I was thinking it would need to be a separate crypto, but now I see it could be a layer like Bitcoin Payment Messages. It's very simple. Include the exchange rate used in every transaction (in local currency) and also sample rates reported by the exchanges. Use this data at the mining supernodes to compile a running average price in terms of several major currencies. That result can be encoded into the current block and read off the blockchain. This would act like pegging the price to a basket of currencies.

I recently read this very insightful article on money vs. bubbles:

http://unqualified-reservations.blogspot.ca/2013/04/bitcoin-is-money-bitcoin-is-bubble.html

There are many motivations to manipulate this mechanism and at worst we'd end up with LIBOR-like scandals, if miners could encode any price that they want into the chain.

It could only work if there is a decentralized exchange and price discovery mechanism, and a way to reach consensus about the current and averaged trading prices (in all world currencies?). There are many technical and economical hurdles to this and it is a problem with a scope much larger than bitcoin.

I guess it'd be an interesting project, but people have been arguing about this since the beginning, I'm still waiting for someone to come up with a concrete plan and implement it.

This thread is the very essence of why Austrian economists say bitcoin cannot be money. If bitcoin was physical, they'd be right, too.

But there is something that Austrian economists are not taking into consideration at all, nor do they seem to value much:

The next money needs to be digital, because commerce has moved online.

So if the world demands a money that exists online, and this fluctuation in price is always going to plague any money that exists online, then the public will therefore accept bitcoin, volatility and all, because there is no alternative.

Anyway, once a bitcoin is worth tens of thousands or possibly millions of USDs, public perception of it will be that it is "too big to fail" simply because they can't grasp the math of how far it will be to fall.

Once they think of bitcoin like that, volatility should get a good bit lighter.

as if real currency ever holds it's value. the price swings are just there for now

People tend to believe something that is in writing. If the most current average price of Bitcoin is encoded in the block in a way that is generally regarded as fair, then people would use that price. If exchanges want to trade at a different price, that's fine and will be reflected in the next block. That's the difference between spot price and rolling average which would make Bitcoin more stable on both ends. It is less likely that it will trade with huge price swings if speculators know there is another price mechanism in play besides exchange rates.

I LOL'd 

I have to agree, and it's one of the bigger problems facing bitcoin.  If bitcoin is ever going to be a "currency" like it was meant to be it is going to have to be more stable.  And quite frankly there isn't anything in place to make that happen, I agree that simply more merchants and people using bitcoin isn't in itself going to make it stable, more stable yes but probably not stable to the point of it being used as an actual currency.

My theory is that
1) Someone/something will come up with some new code to help stabilize bitcoin some how, how this gets implemented with the approval of the entire community is yet to be seen though. I know some very smart people have some very good ideas they are working with right now.

2) Something "better" replaces bitcoin. Bitcoin is version 1.0 in the p2p crypto currency market and it's become quite evident that people like the idea of this type of currency ,  so it's not unrealistic that someone or some company will come up with something similar but address some of bitcoins problems and gains acceptance from the mainstream.