Topic: Bitcoin's first major deflation event, and its consequences (Read 14159 times)

The major effect deflation will have on BTC is price instability.

Just because you say it, does not make it so.  Challenge my reasoning, accept that I'm correct, or fade away.

Bullshit!

Bitcoin does not generate revenue.  Bitcoin goes up and down in market value, that is quite different.


While a stock is often a speculative investment vehicle, stocks are (at the core) contractual evidence that you own a definable piece of a business venture; which (presumedly) exists to turn a profit.  It's the profit that makes the stock an asset, not it's speculative nature.


Nor is it a commodity, because it has no non-monetary utility.  No one desires to aquire bitcoins for their own sake, but to spend or sell them at a later date.  You can't really do anything else with them, at least not yet.  (Colored coins might change that analysis later)


Bitcoin is a currency, as I noted in the "bitcoin is not a currency" thread on several occasions.

An asset is something that generates revenue, bitcoin does that. A stock is an asset and is speculative for the most part people invest in stocks for capital gain, but that is fine if you want to call it a commodity instead of an asset so long as you dont call it currency which it clearly is not.

That's savings, not new value, more commonly known as "income".  Of course, unless you're renting it out, real estate doesn't qualify as an 'asset' either; so this is another one of those economic terms that have a bit different common usage.  If you have a mortagage, your home is a 'liability' not an asset.

What about as a means of transferring money for less than a bank would charge?

An asset is something that generates value to the owner by some other method than speculation.  Bitcoin does not do that, it represents value that can be transfered, but cannot produce new value.  Bitcoin cannot ever be an "asset".

And they are not going to start accepting them.. they cant. It is not currency it is an asset but what kind of asset is it? 

Cool, so we get to keep the increasing value of the currency as opposed to having the central banks siphon the value out of the dollars in my bank account? You feel more comfortable with the idea of your money losing value so you have to spend it right away?

The only reasons I'm not using my bitcoins thus far

A) I'm not being paid in bitcoins

B) Few are accepting them directly.

I'm not converting to fiat and back just to dip into my holdings. As soon as I can just do away with handling fiat and pay my rent in btc I shall do so.

When it takes off with gusto in 2014-2015, then I'll be using them as currency instead of just holding them

Are you saying merchant have nothing to gain from cutting one of their expenses (one of the biggest in some trades) by 60-77%? That sounds like pretty big savings to me.

The problem with processors like bitpay is two-fold. First and foremost it's a third party risk as to the exchange rate fluctuations. By that I mean that this is a volatile market if I take a bicoin payment and the price drops 30% in a day I would potentially lose all my profits on items sold that day as the third party processor exchanged my payments for later deposit into my fiat account. Worse yet there is the chance that a processor could use their capital to "float" the payment to me at a lower exchange rate holding on to my bitcoins untill the market corrected and making a profit at my expense. Next there is the fact that avoiding processor fees is the whole reason to switch to bitcoin in the first place. If Visa and MC charge 2.5 to 4.5 percent depending on the card and the transaction and bitpay charges .99 as it's lowest rate what has the merchant really gained by switching? At that point his only gain is avoiding chargebacks from contested charges and fraud.

When I say the market needs the ability to transfer payments instantly I mean that I need to be able to (if I choose) transfer the overhead portion of my bitcoin income into fiat in my bank account at the exact rate I accepted it at. In other words John Q buys a desktop computer from me for 12 bitcoins and the exchange rate is $100 per at the moment of the sale I need to be able to rout his payment to my exchange account sell the 7 or 8 bitcoins to cover my expenses and have that money in an account that I can make payment to my supplier within the hour. I would want to have complete control of the remaining bitcoins that were my profit so that I could choose to liquidate them or save them for a better exchange rate. This type of control without a third party is the only way small businesses will see the upside.


As to the assumption that stop-loss orders firing automaticly would have made the crash worse than it was I think you're forgetting the fear factor. People don't panic if they know they will be able to sell their bitcoins at the rate they want to (or at least close to it, I'm sure there would have been some slippage) The reason for the crash was panic due to falling prices and more than a minute of lag all day. You have to remember the herd mentality of an exchange. One person getting scared and clamoring to sell will only spook the other investors if they are:  1) already afraid 2) convinced this person knows more than they do 3) fearful they won't be able to place their trade at their risk tolerance level once the frenzy starts. If you have a stop-loss set up you don't have to panic, if no one has to panic, the market doesn't have a panic-driven rush to sell.

http://paymium.com/ among others (links I cant remember at the moment)

What a bunch of bull you cant believe this right?

Not to derail the thread, but who is/are the Europeans doing this?

that would've made the crash even harder. Wether that'd have been desireable I'm not sure.

All the bashing on the hoarders...

bitpay.com

and many other competitors in america and europe already.

I dont have any idea why I keep hearing this "volatility is bad for merchants" argument over and over again.

Oh so the ability to change bitcoins to dollars instantly ... If only we had some sort of "bit pay" system ... Oh wait ... So what was the problem again?

I don't think a panic driven by infrastructure issues should be called a bubble though. Bubbles pop because the groundswell behind some fad can't be sustained due to internal factors in the supply and demand curves.

This was a panic plain and simple. The second in several weeks that we have MtGox to thank for yet they still haven't fixed their massive trade lag. At the very least if they can't fix the lag they should code in stop-loss orders to ensure users won't have losses due to their server insufficiencies.