Topic: please explain the exchange rate for me (Read 1855 times)

f75dec

I would imagine that because of the diversity of the international research presence in Antarctica, and the type of people that kind of research attracts, you would probably have a pretty easy time finding someone to convert your Euros to Pesos there.

There are currently about 9 million bitcoins in existence today, and the current exchange rate is about $5 per bitcoin. So someone could just buy all the bitcoins in existence for around $45 million, right? Wrong! First of all, not all of the bitcoins in existence are for sale on the markets. If you offered to buy everyone's bitcoins for $5 each, you'd only end up with a tiny fraction of the bitcoins in circulation, because most people just aren't interested in selling their bitcoins. At least not for $5. If you want to buy more bitcoins, you'll need to offer a higher price to convince the more stubborn sellers to part with their precious coins. So the more you want to buy, the higher the price becomes. Looking at it another way, if someone buys some bitcoins, the bitcoins still in circulation become rarer (because there are less of them) and therefore more valuable. That's just supply and demand. There's just no way anyone could buy all the bitcoins.

The other thing to keep in mind is that bitcoins can be divided into as small units as you like. Even if you own the very last bitcoin on the planet (the other bitcoins having been bought by an insane trillionaire with apparently nothing better to do with his money than to try to collapse an economy), and that single remaining bitcoin is worth (say) a billion dollars (but you're not going to sell it to that evil trillionaire, oh no, not even for a billion dollars), you'll still be able to buy a burrito for 0.00000001 bitcoins, no problem (if for no other reason than that the seller does want to sell his small piece of the billion-dollar bitcoin).

One last thing: not all of the bitcoins that are going to exist, exist yet. Even if someone did manage to buy all the bitcoins currently in existence, new bitcoins are constantly being mined, and miners are under no obligation to sell their coins, for any price.

I can't tell if you are serious?

Also can't figure out why you decided to necro a 9 month old thread.

Still let me get this straight someone will "destroy" Bitcoin by trading hundreds of millions of dollars (or other currency) to acquire Bitcoins.  The very same Bitcoins which would be worthless if/when they destroyed Bitcoin.  Essentially a one way transfer of wealth worth from "Bitcon destroyer" to current Bitcoin users.

Pretty much the same as trying to destroy the gold trade by buying up all the Gold or putting drug cartels out of business by spending billions to buy all the drugs.

DEA: "So we are really going to stick it to the drug cartels.  We have just been authorized to buy their cocaine wholesale for $20B.  So we give the cartels $20B, buy the cocaine and then destroy it.   This has to destroy the drug cartel.  I mean by showing people how much value drugs have that is bound to make everyone stop selling drugs".

f some one is dominating over the distributed system, isn't it something l can put that he/orshe owns the market and can shut it down without any other effort then money? And if the system is technically cannot be shut down by the government it can be shut down by a couple of rich individuals and then it makes no sense to participate the system where major share of the currency is frozen and even though people are willing to sell something in most cases nobody can buy it because there is no money available?

Is not it considered unsafe for the market?"


What he said

If some one is dominating over the distributed system, isn't it something l can put that he/orshe owns the market and can shut it down without any other effort then money? And if the system is technically cannot be shut down by the government it can be shut down by a couple of rich individuals and then it makes no sense to participate the system where major share of the currency is frozen and even though people are willing to sell something in most cases nobody can buy it because there is no money available?

Is not it considered unsafe for the market?

Wish we had more spots to buy / sell goods

It's fairly close to direct supply-and-demand right now, yes.  If someone were to dump $500 million USD into MtGox right now, offering to buy for $30 per coin, he would dominate the market.  All the "sell" orders up to $30 would be instantly bought up, and within a few hours people would begin listing new sell orders for $30 minimum.

As someone before said however, you can't buy something that isn't for sale.  MtGox is the largest exchange right now, and it processed ~72,000 coins in the past 24 hours (if I'm reading that number correctly).  You'd have to clear out the marketplace multiple times before you could control that much of the market.  Possible perhaps, but I don't know how likely it would be.

hi guys,

Thanks you all for explaining the rate for me.  At this time I take it like if is only supply and demand principle and the bitcoins have not backed up by anything valuable.
Some time ago I was part of developing an autonomous monetary system and this principle was considered to be quite risky that's why I am so picky on the explanations, though I really do appreciate your input.

without seeing a mechanism (something more then supply demand) that regulates the exchange rate I still believe that the market that is based only on supply demand principle is vulnerable from the economical point of view and if some one big enough will look onto existing rate and starts buying bitcoins for 30 US instead of average 20 US I see no way the distributed system will stop people from selling their bitcoins to this big one who is big enough to afford a major share of all existing amount (http://blockexplorer.com/q/totalbc)..

I imagine that: I am  having 500 000 000 US and I have 100 bitcoin valets and I am staring to by right now all the bitcoins available on the market for 30 US per bitcoin. What is going to happen, how the market will prevent my buying so much so I can stop all the vital transactions on the market?

thanks

Yes and no. Yes you can sell at any time under any circumstances....if.... you can find a buyer for what your selling.  you can sell rocks if you can find a buyer (rock crushing company).
 No you cant sell at any time under any circumstances...if...no one wants to buy rocks...... so if you want liquidity (converting something into easily spendable cash at any time) you first need to find a buyer for your rocks (bitcoins) that will pay you in the cash you want to use (euros, usd, chickens, whatever).

Example: You can't trade Euros(e.u.) for Pesos(mx) in Antartica..because no one there uses pesos for currency.
So..to sell find someone who wants to buy.

This is the risk to all economies. You can never be sure that you can trade for what you want, when you want to do it...unless you find other people willing to do the same(in a large audience or market).

Ever try selling coconuts on a small deserted island where you are are the only person around for hundreds of miles?...yeah.. not much profit.

At least the US isn't backed by gold anymore and I think most governments aren't


Governments can't shut down Bitcoin, it's a distributed system. The same way that governments can't shut down the internet.

if anything goes wrong with the government market one can claim the loses from the government.

So basically what you are saying is that if the bitcoins at some point  turns to be illegal (e.g. most governments would not like the not controlled competitor on their market)
and eventually the project will be shut down, then all the US/EURO money I am going to spend to buy bitcoins will be gone forever and I will have no responsible party (e.g. like government)
to claim my euro/us from?

Where does it come from for gold? supply and demand ...



You can't. How can you do it for Gold? It only works if the market is big enough. (it is for Gold, the one for Bitcoins is pretty decent and growing)

can I be sure that at any time under any circumstances I can sell all my bitcoins and buy euro or us?

The rate comes from whomever wants to trade them... if you want to trade you set the rate.. i want 1oo usd for 1 of my bitcoins.... that sort of thing.

There is a subject that they teach in schools that explains all this.. its called 'Economics'.

great! where the rate to the other currency comes from?
and what amount of bitcoins is for sale and what is not?
How can I ensure that if I need 1000 US  now I can get it for my bitcoins now without waiting for this amount of US being available on bitcoin market?

- Not all bitcoins are for sale (not all Gold is for sale)
- If you wanted to buy all bitcoins that are for sale, the price would go up like crazy because you'd create a high demand for bitcoins

Basically bitcoins are exactly like Gold in that:
- They are can be mined.
- There is only a limited amount available

Thanks for your response

yes and no.  It does not have to be a gold, though it has to be something valuable for both sides.
what is this that defines the rather between US and BTC? What is this common thing that the rate is based upon?

If this this about what people is willing to pay, this is imho is not good enough as a permanent solution.
Tell me that it is something that people know how worth is it for the other currency market?  (US/EURO no matter)

I totally disagree with this one. Look at
http://www.ecb.int/stats/exchange/eurofxref/html/index.en.html
for some reason ECB says otherwise:
"The reference rates are usually updated by 3 p.m. C.E.T. They are based on a regular daily concertation procedure between central banks across Europe and worldwide, which normally takes place at 2.15 p.m. CET. "

I believe what people think is not good enough, there should be something that it is worth of.
If say I need EURO and nobody sells Euro for my bitcoins at this time this is a very ticklish limitation

that's what I am trying to understand: if the system is distributed that what body controls and suggest and guarantees a fair rate and not what people think
what body is protecting the market from the internal and external economical aggression that I outlined in a post above?
it's got to be a mechanism that does that, just by looking at the rate I say there should be something that I do not get at the moment.

Please help if you can?

yeap this is such a nice principle. Although I am afraid it cannot be applicable to a bitcoins currency itself  but rather only for the goods and services sold on the market.
if you interested why, I'll tell you why: some one smart and big who decides to shut down or complicate the bitcoins economy will either

1. buy all (or major share of) the currency available on the market through a set of accounts, or/end
2. buy all the major share of goods and services on the market

and become more less what they call "a monopoly" on  the bitcoins market, so this big and smart one will "own" the bitconis and dictates all the rules he wants...
look if we have (re http://blockexplorer.com/q/totalbc)  6562850 bitcoins available it worth 6562850* 20US = 131 257 000 US
I believe this is pretty affordable budget for big guys, so technically they can shut bitcoins down even without lawyers and lawmakers, police, army of internet workers..
which ever is more affordable.

Now all is stopped even though the monetary system is highly distributed. For those who is partially in the system is going to be a dead season and for those who is entirely
into the economy it will be total failure imho...

I do not understand something do I ?

http://en.wikipedia.org/wiki/Supply_and_demand