Another case: You are going from US to Norway, after exchanging your USD to Norway kronor, you find out that everything in that country is much more expensive than United States. You will complain why this country have so high cost of everything, but you will never complain that their currency is overvalued, which might be the root cause of those high prices. Since you have no direct way to affect the exchange rate, you are forced to accept a high cost in that country
By same principle, if you have no direct way to affect the bitcoin exchange, you are forced to accept exchange rate at whatever level it is, even if it cost 1 million dollar per coin
Normally, if a country have lots of export and only a little import, then the foreign demand for local currency will drive its exchange rate up. But currently there is no competitive products sold for bitcoin only (bitcoin economy's export). Unless there are lots of high quality products sold exclusively in bitcoin, the exchange will be the deciding factor for bitcoin prices
Topic: Is foreign currency exchange (FOREX) deciding a currency's value? (Read 809 times)
January 21, 2014, 03:32:52 AM
However, if they had enough amount of USD reserve, or have a credit line that can provide endless USD supply, they might be able to keep the exchange rate of their currency and avoided the loss
Yeah you got the point!
January 20, 2014, 11:33:17 PM
For example, if I mass borrow trillions of dollars and sell them on Forex exchange, will it be possible for USD to lose 80% of its value because no one have enough other currency to buy?
This has happened when Soros mass sold the currency of south asian countries which had only a little amount of USD reserve, so their currency dramatically devalued on FOREX, thus all their GDP counted by their local currency shrank by 30-80% at the same time, and hyper inflation followed
However, if they had enough amount of USD reserve, or have a credit line that can provide endless USD supply, they might be able to keep the exchange rate of their currency and avoided the loss
The currency's value is mostly a consensus and illusion domestically, but there is no such illusion from foreigners. For outsiders to have an idea of the value of a currency, the FOREX market place is the only pricing mechanism. But is this market place a fully free market or heavily manipulated by central bankers?
This has happened when Soros mass sold the currency of south asian countries which had only a little amount of USD reserve, so their currency dramatically devalued on FOREX, thus all their GDP counted by their local currency shrank by 30-80% at the same time, and hyper inflation followed
However, if they had enough amount of USD reserve, or have a credit line that can provide endless USD supply, they might be able to keep the exchange rate of their currency and avoided the loss
The currency's value is mostly a consensus and illusion domestically, but there is no such illusion from foreigners. For outsiders to have an idea of the value of a currency, the FOREX market place is the only pricing mechanism. But is this market place a fully free market or heavily manipulated by central bankers?
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