It is important to note that, in the case of bitcoin, the 21mil bitcoin supply is just a monetary base.
The total potential BTC money supply (in the smallest bitcoin unit - a.k.a. "satoshi") is 2.1 quadrillion.
Topic: Prices Cannot Stabilize - page 3. (Read 7618 times)
Artificial scarcity, a very special character of BTC, in a world that almost everything can be mass produced without limit
What world you live in is what I'm starting to wonder.
I just been to china, you better come to see how many gold mines have been opened here this year. Soon, gold will flood the market like chinese made shoes, at the same time as people getting out of the panic of post financial crisis...
The reason gold price hold relatively stable is because people have replaced most of its use with fiat money, otherwise the price of gold already skyrocketed to a unheard level
You do understand that China is "buying" somewhere near 100% of the output of their domestic gold mines, right?
The reason China has so many gold mines is because they have very nearly zero gold reserves, and they don't want to buy a few thousand tons on the open markets. Nothing is getting flooded any time soon.
I never said anything I posted was a fact. What gave you that idea? Do I need a freaking disclaimer to post on the internet now?
If you don't care if the reasons you give for your opinions are true there's no point in discussing this further. 
Artificial scarcity, a very special character of BTC, in a world that almost everything can be mass produced without limit
What world you live in is what I'm starting to wonder.
I just been to china, you better come to see how many gold mines have been opened here this year. Soon, gold will flood the market like chinese made shoes, at the same time as people getting out of the panic of post financial crisis...
The reason gold price hold relatively stable is because people have replaced most of its use with fiat money, otherwise the price of gold already skyrocketed to a unheard level
The amount of goods you can buy with a certain amount gold has remained relatively stable over thousands of years! The fiat inflated around it.
Have you considered checking your "facts" before you post them? The supply of coins grows at the same rate regardless of demand. Stability requires a flexible supply increase to correspond with demand increase. This limitation will be an impediment to the growth of Bitcoin commerce.
You're completely incorrect. Prices cannot do anything BUT stabilize in the long-run. Artificial scarcity, a very special character of BTC, in a world that almost everything can be mass produced without limit
What world you live in is what I'm starting to wonder.
[/quote
+1
Unless you're talking about digital goods, there are practical limits to the production of most things. Stuff if made of other stuff. There is only so much stuff.
Artificial scarcity, a very special character of BTC, in a world that almost everything can be mass produced without limit
speculators
What you are describing are speculators: http://mises.org/daily/4466
Price stability depends largely on market size and history, and bitcoin doesn't have much of either yet.
Maybe eventually we'll end up with a self-interested party holding a vast store of bitcoin, and releasing it into the market or buying it up to try to keep the prices stable, the way DeBeers does for diamonds now.
What you are describing are speculators: http://mises.org/daily/4466
Price stability depends largely on market size and history, and bitcoin doesn't have much of either yet.
I wouldn't call DeBeers speculators. They don't so much guess and try to make a profit of market movements as they actually determine and control the market by having a near monopoly on production and distribution, and holding huge reserves of diamonds, keeping them off the market and buying up any new diamonds to keep the market from being flooded. A wealthy self interested party could theoretically do the same with bitcoin, buying up large quantities, making more wealth off of their large holdings, and using that wealth to buy up any unexpected bitcoin flooding the market (such as during start of a panic sell), just to preserve the value of their holdings. DeBeers is more of a powerful and sophisticated hoarder than a speculator.
Maybe eventually we'll end up with a self-interested party holding a vast store of bitcoin, and releasing it into the market or buying it up to try to keep the prices stable, the way DeBeers does for diamonds now.
What you are describing are speculators: http://mises.org/daily/4466
Price stability depends largely on market size and history, and bitcoin doesn't have much of either yet.
Bitcoin is only like gold if all of the gold miners were competing over the same mine. You would have either one miner get X amount of gold, or N miners getting X/N *(mining power/total mining power) gold per miner. I understand that scarcity is a fundamental qualification for a commodity to become a currency, so maybe it's OK for Bitcoin to have such extreme scarcity since it is so highly divisible. Maybe I should rethink my knowledge on theory of money, since I'm familiar with the basic properties required for something to be money but have never thought about how those properties can counterbalance one another.
Nah, you're pretty much right. There will definitely be booms and busts, regardless of what currency we use, and you're right that people will buy up more when the price goes up, and sell more when it goes down. Hopefully price rising up will drive holders to cash out, and prices going down will cause willing investors to buy it up, but if that barely works in the stock market, I would expect for it to work for bitcoin either. Our main hope is that in the long run people will understand that the value of a bitcoin is mainly as exchange, not as investment, and resist running to it every time they see it increase in value a bit, but considering it's a strong and dependable store of value, I fully expect everyone to run to it every time the economy hits a snag. Maybe eventually we'll end up with a self-interested party holding a vast store of bitcoin, and releasing it into the market or buying it up to try to keep the prices stable, the way DeBeers does for diamonds now.
DeBits?
*shudders at thought of a single entity controlling 60+% of all bitcoins*
Bitcoin is only like gold if all of the gold miners were competing over the same mine. You would have either one miner get X amount of gold, or N miners getting X/N *(mining power/total mining power) gold per miner. I understand that scarcity is a fundamental qualification for a commodity to become a currency, so maybe it's OK for Bitcoin to have such extreme scarcity since it is so highly divisible. Maybe I should rethink my knowledge on theory of money, since I'm familiar with the basic properties required for something to be money but have never thought about how those properties can counterbalance one another. In fact, maybe a theoretically optimal currency is one that approaches infinite scarcity and infinite divisibility. Thanks for contributing to the discussion and getting me to reconsider my initial complaints.
It takes a bigger man to rethink his initial assumptions, than stubbornly hold on. Good sports.
Bitcoin is only like gold if all of the gold miners were competing over the same mine. You would have either one miner get X amount of gold, or N miners getting X/N *(mining power/total mining power) gold per miner. I understand that scarcity is a fundamental qualification for a commodity to become a currency, so maybe it's OK for Bitcoin to have such extreme scarcity since it is so highly divisible. Maybe I should rethink my knowledge on theory of money, since I'm familiar with the basic properties required for something to be money but have never thought about how those properties can counterbalance one another.
Nah, you're pretty much right. There will definitely be booms and busts, regardless of what currency we use, and you're right that people will buy up more when the price goes up, and sell more when it goes down. Hopefully price rising up will drive holders to cash out, and prices going down will cause willing investors to buy it up, but if that barely works in the stock market, I would expect for it to work for bitcoin either. Our main hope is that in the long run people will understand that the value of a bitcoin is mainly as exchange, not as investment, and resist running to it every time they see it increase in value a bit, but considering it's a strong and dependable store of value, I fully expect everyone to run to it every time the economy hits a snag. Maybe eventually we'll end up with a self-interested party holding a vast store of bitcoin, and releasing it into the market or buying it up to try to keep the prices stable, the way DeBeers does for diamonds now.
You made an important point here: "Gold miners mine more gold when prices go up."
But they do so by expending more effort and resources to mine more.
The equivalent, in the world of bitcoin mining, would be to apply more processing power to mining when prices go up, giving themselves a bigger cut of the block rewards.
And still, the point remains: the supply of bitcoins for sale at any point is as flexible as any other commodity (more than some others, really.) Even with all miners selling all coins ASAP, there are still 8 million bitcoins in existence; that's potentially about 22K bitcoins per day if sold off throughout the course of the year, far more than the miners produce.
So there's really no need to worry--some of these reserves will join the public market supply if the price rises enough, just like with gold, wheat, etc.
Bitcoin is only like gold if all of the gold miners were competing over the same mine. You would have either one miner get X amount of gold, or N miners getting X/N *(mining power/total mining power) gold per miner. I understand that scarcity is a fundamental qualification for a commodity to become a currency, so maybe it's OK for Bitcoin to have such extreme scarcity since it is so highly divisible. Maybe I should rethink my knowledge on theory of money, since I'm familiar with the basic properties required for something to be money but have never thought about how those properties can counterbalance one another. In fact, maybe a theoretically optimal currency is one that approaches infinite scarcity and infinite divisibility. Thanks for contributing to the discussion and getting me to reconsider my initial complaints.
The supply of coins grows at the same rate regardless of demand. Stability requires a flexible supply increase to correspond with demand increase. This limitation will be an impediment to the growth of Bitcoin commerce.
You're thinking of the total in existence.
But what's important is the supply for sale. That's what "supply" means in an economic sense. Just because an average of 7200 BTC are mined daily doesn't mean all those bitcoins will always be thrown onto the market. Miners have the option of holding onto and/or spending their bitcoins rather than putting them up for sale on the exchanges. Also, holders of bitcoins have the option of throwing their previously-purchased coins back onto the market for sale.
At any given time, between zero and all available bitcoins in existence can be for sale. That's as flexible as any other asset/resource/whatever.
You are correct if you assume miners hold when prices are low and sell when prices are high. But if most miners behave the same way as most of the market, they will constrict supply during uptrends and beef up supply during downtrends. In that case, supply moves in the opposite direction of demand.
Think about the original suppliers for gold and for Bitcoins. Gold miners mine more gold when prices go up. Alternatively, we can say that the earth supplies more gold to the miners due to the miners investing more mining resources into extracting it. For Bitcoin, the network gives miners the same amount of Bitcoins when prices rise. This remains true no matter the quantity of mining resources invested.
You made an important point here: "Gold miners mine more gold when prices go up."
But they do so by expending more effort and resources to mine more.
The equivalent, in the world of bitcoin mining, would be to apply more processing power to mining when prices go up, giving themselves a bigger cut of the block rewards.
And still, the point remains: the supply of bitcoins for sale at any point is as flexible as any other commodity (more than some others, really.) Even with all miners selling all coins ASAP, there are still 8 million bitcoins in existence; that's potentially about 22K bitcoins per day if sold off throughout the course of the year, far more than the miners produce.
So there's really no need to worry--some of these reserves will join the public market supply if the price rises enough, just like with gold, wheat, etc.
Yawn.
A) The supply curve is not linear and stops at exactly 21M BTC (to use your jargon: it doesn't
grow at a constant rate. And as pointed by someone else in the thread, said rate is currently
fairly small). Your first point is thereby made moot.
B) The headroom for demand increase is almost infinite because it can potentially grow to
become a sizable fraction of the world's economy.
C) The price stability problem for e-commerce is already being dealt with by enterprising
folks offering instant BTC to USD conversion (for a fee, of course).
So: nope.
A) The supply curve is not linear and stops at exactly 21M BTC (to use your jargon: it doesn't
grow at a constant rate. And as pointed by someone else in the thread, said rate is currently
fairly small). Your first point is thereby made moot.
B) The headroom for demand increase is almost infinite because it can potentially grow to
become a sizable fraction of the world's economy.
C) The price stability problem for e-commerce is already being dealt with by enterprising
folks offering instant BTC to USD conversion (for a fee, of course).
So: nope.
A) I should have clarified. I meant fixed rate, not constant. The rate is simply fixed differently depending on amount of time passed.
B) This proves my point. Yes, demand can increase substantially, and supply will not adjust to match, thus creating a greater price increase than would otherwise occur. That's why I believe prices will be sky high at some points, but I think you're assuming that I'm trying to bash Bitcoin and say it's worthless. I'm just saying that prices will be less stable than they should otherwise be, and so this imperfection might make Bitcoin commerce less efficient. We will have cycles of people hoarding coins en masse during upturns and then spending coins en masse during downturns.
C) This is not really a solution to the problem. It is equivalent to saying "because Bitcoin is unstable, people can substitute Bitcoin for other money".
The supply of coins grows at the same rate regardless of demand. Stability requires a flexible supply increase to correspond with demand increase. This limitation will be an impediment to the growth of Bitcoin commerce.
You're thinking of the total in existence.
But what's important is the supply for sale. That's what "supply" means in an economic sense. Just because an average of 7200 BTC are mined daily doesn't mean all those bitcoins will always be thrown onto the market. Miners have the option of holding onto and/or spending their bitcoins rather than putting them up for sale on the exchanges. Also, holders of bitcoins have the option of throwing their previously-purchased coins back onto the market for sale.
At any given time, between zero and all available bitcoins in existence can be for sale. That's as flexible as any other asset/resource/whatever.
You are correct if you assume miners hold when prices are low and sell when prices are high. But if most miners behave the same way as most of the market, they will constrict supply during uptrends and beef up supply during downtrends. In that case, supply moves in the opposite direction of demand.
Think about the original suppliers for gold and for Bitcoins. Gold miners mine more gold when prices go up. Alternatively, we can say that the earth supplies more gold to the miners due to the miners investing more mining resources into extracting it. For Bitcoin, the network gives miners the same amount of Bitcoins when prices rise. This remains true no matter the quantity of mining resources invested.
I think there is another problem here.. What do you mean by stabilize?
From what I've seen, there is no such thing out there. No world currency or commodity stabilizes... they always fluctuate due to millions of little and big pressures in the market.
I'd say bouncing between 6 and 7 for the past week is pretty stable... :p for bitcoins.
From what I've seen, there is no such thing out there. No world currency or commodity stabilizes... they always fluctuate due to millions of little and big pressures in the market.
I'd say bouncing between 6 and 7 for the past week is pretty stable... :p for bitcoins.
The supply of coins grows at the same rate regardless of demand. Stability requires a flexible supply increase to correspond with demand increase. This limitation will be an impediment to the growth of Bitcoin commerce.
You're thinking of the total in existence.
But what's important is the supply for sale. That's what "supply" means in an economic sense. Just because an average of 7200 BTC are mined daily doesn't mean all those bitcoins will always be thrown onto the market. Miners have the option of holding onto and/or spending their bitcoins rather than putting them up for sale on the exchanges. Also, holders of bitcoins have the option of throwing their previously-purchased coins back onto the market for sale.
At any given time, between zero and all available bitcoins in existence can be for sale. That's as flexible as any other asset/resource/whatever.
The supply of coins grows at the same rate regardless of demand. Stability requires a flexible supply increase to correspond with demand increase. This limitation will be an impediment to the growth of Bitcoin commerce.
You're completely incorrect. Prices cannot do anything BUT stabilize in the long-run.
Now, in a Bitcoin world we may see the price for a coin change every day, but that change will asymptotically shrink over years and decades.
What's important in a currency is that changes in money supply are A) minimal, B) predictable, C)not arbitrarily decided by specific actors. Bitcoin satisfies these requirements - and in fact Bitcoin offers the most predictable money supply ever created in any form of money.
And you are completely ignorant and stupid. How do you know what must happen in the long-run? Why are these things important? How do you know that they are important?
What a fucking idiot you are. It is really mind-boggling.
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