Topic: Bitcoin's first major deflation event, and its consequences - page 4. (Read 14163 times)

i would think it's rather because i would expect any poster, at all, to take this discussion more seriously. but having been shouted down and flamed for alternatively beating a dead horse and hating bitcoin, i've lost a little faith in the spirit of open discussion that moderators like yourself try to encourage.


it's about bad behavior. we all agree that ponzi schemes are bad behavior. why is it so difficult to see why this, too, has a negative impact on the adoption of bitcoin? this is all i've been trying to say this entire thread.

That's because your mind naturally appeals to authority and you haven't yet learned to restrain that appeal and listen to logic, reason and empirical evidence above else instead.

My role as a moderator should lend zero credibility to my posts. All my role is is an authority on which posts follow the rules of this forum and other things related to rules and operations of this forum (two sections only anyway), that's it. When my posts aren't about that, me being a moderator has absolutely no relevance. None what so ever. I'm just an ordinary poster like yourself and my post should be evaluated by everyone through the use of reason, logic and empirical evidence whether or not they make sense.


Believe it or not the issues you raised have been raised so many times already that I seriously doubt you bring anything new to the table and even if you do, you are wrong. Not from an economical perspective but from a technological and philosophical perspective. In case you didn't notice even if you have a valid concern and a valid proposal, Bitcoin's rules can't be changed. So if you think it has a flaw I suggest you take the open source code, modify it and start your own alt cryptocurrency: https://bitcointalk.org/index.php?board=67.0 Because other than that no matter what you say or how much sense you make, for better or for worse, Bitcoin is what Bitcoin is. Take it or leave it. It's up to you.

i would expect a moderator to take discussion more seriously than this. i tried to address your point and present a more nuanced argument than 'deflation is bad'. in fact, i would easily disagree with that statement myself. look! we're in agreement!

if you actually took the time to read past the OP, you'd see i fear the long squeezes associated with too-fast growth driven by the new masses of uninformed speculators, not deflation.

you might as well be a republican screaming about how i hate america.

+1  That is a truly important observation.

In my opinion, bubbles are not only natural in human history(Yes they occurred under a gold standard as well, though to a much lesser extreme), but also beneficial in the case of Bitcoin.

Because of the distribution model of Bitcoin, early adopters/miners of Bitcoin in 2009-early 2011 obtained a majority of the coins without having much use for them at that time. The first bubble was the only way to make them redistribute it either because of greed(on the way up) or fear(on the way down). I would never have been able to buy some coins in the single digits if the first bubble did not pop.

Without distribution of coins to a larger base, the price cannot reach stability. The more hands that hold Bitcoins, the lower the volatility will become. And the fear phase during bubble popping is the best time for large holders to redistribute

Foolish foolish fool you craaazzy fool. http://www.youtube.com/watch?v=pYaXFCFgMpA. A little sublime for you ass from sublime5447. With respect.

Yes, we can all get rich if we keep voluntarily assigning value to bitcoins in terms of goods and services we trade via Bitcoin network. If more and more people keep valuing their labor, fiat, or property in terms of bitcoins, the value of coins will keep rising. The opposite applies, too.

Oh how I yearn for the day far in the future when all of you with sophistry infatuated people will get your meeting with the cold hard reality and when this "Deflation is bad, mkay?!" idiocy will have been destroyed once and for all much like "Earth is the center of the universe, mkay?!" once upon a time was.

I really can't wait.

It is very clear to me what is happening and why it is bad for BTC. Everyone around here is wearing green colored glasses. We cant all get rich, markets dont work like that. This time is not different!! It is never different.

the problem is that there is little difference, but this time around, we see the effect bolded above. during the first bubble, the prices were not sustainable because the irrational bulls converted all of their fiat to btc and there reached a point where the influx suddenly stopped. this caused a panic and a huge correction, which left many, many bag-holders in its wake.

this time around, the influx of new buyers isn't slowing. people with little to no exposure of bitcoin are rushing to buy simply because the price has been going up, up, up. it's the same psychology, except the scale is much larger and the price is much higher for many more coins. smart money pulls its asks because it sees that the fundamentals are different this time around, and there won't be a huge crash. selloffs are immediately absorbed by new buyers who don't understand the risk of purchasing an asset whose price has made 500% gains in the last year.

this is going to lead perhaps not to a bubble as it did before, but a massive deflationary event that pushes the purchasing power of bitcoin far above its track for healthy growth (see the height above the SMAs that the price is at right now) and will inevitably lead to massive profit-taking, predatory speculation, and price volatility. many new investors who thought they were going to be rich will find themselves in the same position as those who bought coins at $30. the growth of the userbase is good and should be encouraged not by predatory speculative behavior where earlier adopters laugh as the new users line their pockets, but lower-risk lower-price-point profit-taking that won't introduce massive volatility into the market. the former will help the bitcoin community grow in the long run. the latter will hurt the adoption of btc in the short run.

in other words, it's short-sighted and introduces systemic risk into the community. this is an example of a nash equilibrium that leaves players worse off than if they played in a pre-coordinated manner, like the Prisoner's Dilemma. everyone would be better off if the price of the coins were growing but with less risk of suddenly crashing. at this point purchasing coins is again a very high-risk investment because users have decided to distribute risk amongst the entire userbase while they continue to play musical chairs.


don't let them fool you. traders will point to good news during rallies and bad news during sell-offs but the cause and effect is less clear. i say it's very straightforward, positive-feedback loop deflation.


thanks for the bump. the responses in this thread made me more worried than when i first made the post because of the unchecked bullish sentiment.

First let me say that I didnt read all of the post, but that I agree with arepo, in fact I have really enjoyed most of his post. The problem that he is talking about relates first and foremost to price stability. I can tell from the responses that I did read that we don't have a lot of retail business owners commenting here. This price spike has pushed me right out of the market and has friends saying that they won't use it. I have a couple friends that were looking at buying and have said no way. "I feel like I am missing out on making a lot of money, but I just cant take that kind of risk" I would not even consider taking BTC as payment for my goods at this time. I simply can not take payments in a currency that is so volatile. This is the heart of the matter. If people are holding coins off the market it pushes up price and distorts the signals.  The only way for BTC to work is if it is used as money not a commodity. I find no reason what so ever to compare the two. BTC is 1's and 0's in the cloud with no intrinsic value what so ever.       

I think no one here took into consideration major difference between bitcoin and fiat- fiat economy is closed by regulation and number of its "users" isn't growing much. Introducing new significant services into meatspace where fiat can be spent is hard. On the other side, btc economy is very open, there are many new people streaming in and some inevitably invent new ways for bitcoins to be spent, making large part of otherwise hoarded bitcoins circulate. So until bitcoin becomes widespread, I don't fear hoarders/deflation at all. The same incentive that drives hoarding, is also driving people who want to earn bitcoins from hoarders.

You could also ask why on earth people were selling Bitcoin for 12% of its value a year ago.

what on earth is happening NOW.. why the crazy jump of 800% since about a year ago.. it's good.. but what seems to actually be driving the price up so fast lately..

I read most of this thread and I had a lot to add, most of it I forgot. This is what I remember:

I've never fully understood how exactly a "deflationary event" works. The definition of deflation brought up ("increased demand + limited supply = lower prices of goods/services") makes sense. But what makes this a "deflationary event". It's just increased demand for the medium so value measured with it has a lower price. And how does "selloffs don't cause panics and are almost immediately absorbed by buying pressure, for one" follow from that. 2011 bubble was also increased demand + limited supply. Where's the difference?

Let's face it: Bitcoin doesn't really have an economy: silkroad et al just use bitcoin as a payment mechanism to transfer fiat from buyer to seller and satoshidice et al don't produce anything or "create value".

Bitcoin is indeed very much like gold. I would probably even like bitcoin if it didn't have the added feature of being useful for making payments (which gold is not). Bitcoin is unique in the sense that it has a limited supply yet can be used as a payment mechanism.

;tldr: I don't understand how "deflationary event/spiral" is a theory applicable to Bitcoin because Bitcoins unique combination of Store-of-wealth and payment functionality and also because of the lack of a real bitcoin economy.

arepo, if you want to discuss, can you answer the question(s) in the second paragraph?

this is probably . i'm just worried that the wave of new investors or whatever is behind this price action knows not what they do.

The why this is "worse", it is self-reinforcing, then rational people would do it. I guess you are probably from a point of view of bitcoin economy development, but that is never the motive for most people here, they are just "rational economic person". And no one could /should try to control other people's motives.

Maybe bitcoin's destiny is a speculative virtual asset, not a virtual currency, maybe before becoming the virtual currency, it has to first become a virtual asset and now we are in this phase?

It is just a wishfully thinking if you believe bitcoin's road to currency would be smooth and easy.

I have exactly the same experience with my own friends, smart and not so smart. The nice thing about the free market, however, is that it works even if no one understands how.

If some people understand, they will be able to speculate and make a gain. The side effect of the (successful) speculation is just that the price will more quickly reach its destination.

Not if Satoshi Dice is listed in BTC.

If Satoshi Dice is listed in BTC, its price would go up or down based on its own merit, as most of the costs/revenues are in BTC.
Just because the purchasing power of BTC goes up doesn't automatically mean less people will gamble ;P
It just means that when they do, they risk more in terms of STC, but they are still risking the same BTC.

So BTC's purchasing power wouldn't be a factor when buying/selling stock denominated in BTC.

BTC's purchasing power would only be a factor when buying/selling STC (or stock denominated in STC as you would have to convert to STC).