Topic: Citi report on bitcoin (Read 2508 times)

They needn't be 100% accurate... Analysts give out price targets on stocks all the time...

Predicting future price movements is a rather hard thing to do. Actually it's more or less impossible. If it was possible and they knew how to do it, they'd be best off just using that knowledge in order to do some traded on their own. Why would they give away their golden tickets to the public?

I don't know why analysts try so hard to explain something that has happened in the past.
They should work hard and try to predict future price trends. Then maybe they will make some money. 

Don't know whether I buy the theory of an increasing merchant adoption depressing the price. I mean, it could be true, then again, maybe it isn't... I don't know though, how mining could influence the price at all, doesn't compute in my books.

Price meets where the supply meets the demand.

Down trending recently implies there is more selling than buying and hence depressing the price.

I would agree with this. I would also say that these people are also likely buying more bitcoin then they are spending so there is a net effect of people buying a net amount of bitcoin.

Their investment bank divisions are somewhat in the business of speculating. The retail type businesses, and other businesses that are in the business of producing actual goods are not designed to speculate.

That is true. Short term, more merchants attract more unused coins which are then sold. Yet, with every merchant accepting BTC, it becomes more popular and widespread. This drives up value.

So miners drive price down while growing adoption drives it up. A tug of war.

I am optimistic because the growth of adoption is increasing, while mining rewards are decreasing (difficulty goes up, and block reward will halve again)

Also the amount of fiat currencies on the planet is growing as well.

Unless BTC is replaced by some other coin, it is going to increase in value sooner or later.

The report is somewhat true to some extend.

Bitcoin goes up in the last 4 years mainly because people are hoarding them and not using them. As soon as people spend it, merchant will liquidate the payment as soon as consumer make the payment and hence depressing the price.

Ironically, Citi, JPM and their ilk almost solely are.

The citi report mentioned that if a company does hold some amount of fiat then their overall risk profile would be worse. Also if a company does not have any expenses in terms of bitcoin then they would have nothing they can use their bitcoin for.

Most companies are not in the business of speculating.

Citi had not really said anything we didn't know before
Kinda peddling the obvious as insight
Plus can't help feeling they might be talking own the price for their own ends

Im guessing next financial year will see increased implentation of bitcoin strategies. Hopefully this includes b2b plans / projects.

The theory is completely counter to empirical observations. New merchants have been coming online gradually and continuously since 2010. All the way from Alpaca socks to Dell. Has the price been falling since 2010?

Not only do I replace what I spend in btc, if its a 'dip' at the time, I often buy more.

Accepting BTC is a newsworthy event, and you can lessen the impact for conservative stockholders by implying 100% conversion to fiat:  "At this point bitpay converts all paid BTC to USD at the moment of sale so there is no exchange risk".  However, CHANGING that 100% to 90% then 50% then 0% is easy and can be done without any external difference.

WRT the idea that merchant adoption = short term slide, places like coinbase make it so easy to cash out that this seems unlikely.

If people are buying bitcoins to exploit a discount, they are, nonetheless holding bitcoins for a short period of time and in a few cases will continue to hold some change.
Both ways will increase the time some bitcoins are held by people. It is like a pipe: longer the pipe, more  water there will be.

The merchants adoption will start to not cause downward pressure as they start to hold bitcoins (like Overstock) and use them to B2B payments (I see Dell starting to do this with some chinese suppliers in the future) or paying employees, etc. This also make the pipe longer. And in time the pipe will close on itself in some, growing, loops.

The other part of the hydraulic comparison is about inflation.
Currently, adoption (pipe becoming longer) and holders (reservoir inside the piping system) are the cause of increasing exchange rate. In essence they are sucking value in.
Inflation is like the level of the water. Inflation of bitcoins is starting to become lower than inflation of USD (other currencies already have higher inflation and other have lower inflation now but will have higher inflation in the not so distant future).

The USD piping (monetary) system is connected to the BTC system, but as inflation rise, it is like the level of a water raising. Pressure will make the water (value) there to move to the lower pipes and reservoirs (BTC). Higher the pressure difference (inflation difference) faster the water will flow. And if pressure mounth enough and force is concentrated enough, weak point will break increasing the leaking to the USD system.

There is a strange (network) effect: more pressure will force the system at lower level to grow faster, increasing the leaking of the system at higher level (fiat money), where the outflow from higher systems will cause them to shrink, pushing more water out.

Like in real world pipe systems, there could be choke points, where water flow slow down, limits to the size of pipes and speed of water. So, whatever conditions in other point of the system are, the total leakage rate could not exceed some limits.


 

This. Either people are replacing the Bitcoins they already had or they didn't have Bitcoins to start with and are merely buying them to buy with a discount.

Agreed, and, although I can't prove it, I think that BTC velocity is widely misinterpreted in many of the writings I've seen.  I believe BTC velocity is significantly lower than the stats I've seen.  Merchant adoption will have a big impact on velocity, which will help in the long run.

I think it's also reasonable to suspect that many purchases from, say, Overstock or NewEgg, aren't really people who are "selling" BTC, per se.  These folks are likely to re-buy BTC to replenish their supply.

There is really no case to be made that merchant adoption is bad short-term or long-term.

Retail adoption is good. It creates more public awareness of not only bitcoin but also the features of bitcoin. Citi is correct to say that most merchants will likely sell their bitcoin when they receive it as revenue, however they are wrong to say that this creates selling pressure on bitcoin. The reason they are wrong is because in order for someone to spend bitcoin they would first either need to buy it or mine it.

Geez!!!! Did they also find that wheels are round??? 

Bitcoin into life, all discussion will disappear.

Steven Englander has been myopic on bitcoin for a while now; he's basically on my internet-wide ignore list.

 

Big banks with active trading desks often produce documents helping members of the general public to know which direction the price of a commodity is moving in the future. Trebles all round!

we've broken the downtrend lines.  we've also broken the uptrend lines.  but time is also important, as i am a cycle trader.  this pullback interval has been longer than normal, despite lots of good news, but we are still above last April's low.  so i think it is "time" and the fundamentals have, imo, improved.  plus, other factors.

"Bitcoin’s price is poised for “acute instability” due to an oversupply of coins from miners and large merchants, along with a weak growth in demand, according to a new research note from financial giant Citi."

the miners having a big impact on the price, because they giving new supply of bitcoins. even there are just 3600 BTC mined a day compared to already 13.000.000 on the market, a part of them have to find new buyers.

What sort of basis are you using to conclude that this cycle has now completed? This would only be clearly visible in hindsight, so I am curious what metrics you are looking at.

yes, a little bit of anxiety now for much bigger benefits later.

 i think it is great that btc has someone like Patrick Byrne on its side pushing the barrow. I dont know how these things work, but I'd say Overstock have gone from implementing to holding a % quite quickly. And then Newegg (smartly) begins offering % discounts for btc usage and this little niche economy grows and grows.

that theory still bugs the heck outta me.  i understand the gist of it but the increased monetary velocity will in the long run greatly improve the price dynamic as more consumers adopt and as more merchants hold back BTC.  the secondary supplier function should start getting more widespread as well.

we've also arguably completed a natural down cycle as a result of the run up late last year.  there will come a time when the price starts to rise along with increasing merchant adoption and all this talk will disappear.

Just read the coindesk article re: citi report on bitcoin saying the effect of mining & increased retail adoption is depressing the price.

My possibly naive takeaway from this is that on the retail adoption side this is a necessary evil. upon acceptance a company may initially sell straight away into the market be ause they are basically testing the waters, but as their btc sales stabilise they will (lseeing the successful example of overstock) begin to hold a percentage in btc. this will equal less supply and will encourage b2b usage in the medium term even though it has a price dampening impact initially.

its part of the reason for the stagnating price but will also be part of the reason that it eventually takes off again.

id guess its a 12 month lag between accepting, holding and then paying suppliers in btc.

http://www.coindesk.com/citi-miners-merchants-keeping-bitcoin-prices-check/