Topic: Screw Deflation-To-The-Moon, Bitcoin Needs Help NOW (Read 2815 times)

I think this is a pretty deep pseudo-hidden-but-not-really issue in the Bitcoin community and economy.  Once a prospective new user starts looking into Bitcoin, it takes about 10 minutes to figure out that there is a smallish group of old-timers who are holding seemingly very large amounts of coin relative to what would be practically attainable through purchases.

If, indeed, Bitcoin is intrinsically deflationary, (I have some fun theories about this but I'll beat that horse sometime later when I'm in a more curmudgeonly and annoying mood ), then, overall, most new entrants to Bitcoin are going to have to deal with this: the entire Bitcoin economy is largely concentrated in a relatively small group.

Regardless of how one feels about that from a "social justice" perspective, it seemingly works against the motivational incentive profile of a typical prospective new medium-of-exchange Bitcoin user (as opposed to a speculator or prospective miner for example -- by most accounts, these are the people we "want" in the market).

Specifically, the whole point of Bitcoin -- at least, I imagine most prospects feel this way, I may be wrong -- is to create an instrument of exchange which democratizes monetary policy and removes arbitrary state-imposed legal impediments to unencumbered free exchange, for better or for worse.

If that's the appeal for Joe Newbie, the idea that a sort of market oligarchy exists -- specifically, if Joe Newbie comes to believe that there is a deeply entrenched old-guard, every one of whom has sufficient holdings to sell through the entire market and basically turn the "deflationary" BTC into a Zimbabwe-style cautionary tale, that doesn't feel very liberating.  Actually it feels an awful lot like a fiat currency.

This is probably why the alternate currencies have held such appeal despite not really offering many new technical innovations.  If Joe Newbie is gonna do this, after all, he'd obviously want to be the old guard if that's the way it's going to be, rather than get a bunch of wealth tied up in a currency that only retains its value so long as some kind of scary detente maintains between various old-guard oligarchs, many of whom may for all he knows have immediate plans to divest themselves of their holdings but simply are smart enough not to do so in a way that yields grossly sub-optimal returns.

OTOH, what can a guy reasonable person expect to happen?  Compared to anything in Bitcoin-land, we more-or-less all live in highly regulated economies with absolutely enormous regulatory and monetary control structures which, with a few notable exceptions, all have evolved complex homeostatic systems for the maintenance of price stability.

Some might not like to admit it around here, but the global fiat-currency economy gradually evolved into what it is today over many years of trial and error and it has an awful lot of things going for it.  The technocrats in charge of fiat currencies are almost always very concerned with price stability (how successful they are in achieving it varies of course) and these "traditional" economies have developed all kinds of elaborate policing and insurance practices which do provide people with some confidence and maybe even some actual ability to recoup their losses when they get ripped off.

Now here comes Bitcoin which deliberately eschews all of that, and has a small economy consisting mostly of crooks, techno-activists and monetary policy extremists.  And we are all going bonkers due to a 66% price fluctuation!?  Meh... I guess when a chart goes up and up and up for a while, even the wisest of us have a hard time accepting and anticipating it when the party is over.

We just have to get back to business guys.  The solution, as everyone has already said anyhow, is to just ignore this and use Bitcoins for useful stuff and hope the guys with the nukes keep 'em muzzled.  If that can happen, everyone can possibly get what they came here for.  But the present circumstance really shouldn't cause too much panic imo.  BTC shows a lot of promise but it's still in an incipient stage and that's OK.

Caveat emptor: this won't be the last time something like this happens, so diversify and be happy -- or be willing to lose, if you want to gamble.

tl;dr I guess, but I don't have time to write all this crap and edit it so I guess you get what you paid for

What is your goal exactly? Increase the value of bitcoin, or spread its use as a payment method? Frankly, I dont care about the former. I do care about the latter, and what that takes is not existing bitcoin users spending their bitcoins back and forth, it takes realworld businesses accepting bitcoins. Doesnt matter if they price in dollar and convert to bitcoins. Word of mouth is more effective than investment funds for that.

FWIW, Ive been contacting a few companies and non profits, and at least one is most likely going to implement bitcoin donations (The Real News). Not a big deal by itself (though they do reach an audience of tens of thousands, which isnt bad), but if everyone does similar, get one merchant, one website or one organization to accept bitcoins, that will get this critical mass, and the rest will go automatically. VCs and what not, they will jump on it, whether or not you post threads about it. Thats the idea behind a free market after all. Either that, or it wont happen, in which case bitcoin deserves to die.

The need is for a Bitcoin economy. As you correctly point out, the current use modality is that spending Bitcoins = buying stuff with dollars, because the merchant immediately translates in and out of dollars.

We do not have a Bitcoin economy, we just don't. We have (at best) a bunch of people doing arbitrage, in one way or another (and at worst, a pyramid).

The question is how do we go from here to a working economy? There are two essentials: 1) much better infrastructure and 2) engines of use. Both of these require investment.

The first need is well discussed by Gavin and others, but it goes beyond security and scalability. Bitcoin also must have a wide array of access vehicles, ease of use interfaces, idiot proof point-of-purchase sales mechanisms, etc. These developments are moving forward but they are also struggling mightily. Little garage guys are putting their heart and soul and time and money into development. They are carrying the flag as far as their personal resources allow and then dropping dead, used up. How many of them have you seen come and go already? For the Bitcoin rich to simply chalk up these "losers" to casualties of war, and then continue to sit back and wait for some other bright guy, full of inspiration, to pick up the flag and move it forward is a recipe for Bitcoin implosion. 

The second need is for 'engines of use'. At present, Bitcoin is a genius-proof-of-concept looking for a killer app. This should not be, because the advantages of Bitcoin immediately lend themselves to killer apps. I posted an article about that here http://bitcoinredlight.com/2526/bitcoin-killer-apps/, but (regardless of what one believes may be 'the killer app') the point I'm making right now is that Bitcoin entrepreneurs need Bitcoin venture capitalists! Anyone who does not hold a fair amount of Bitcoins and is a Bitcoin entrepreneur knows, all to well, that the prospect of even surviving are thin, letting alone getting "Bitcoin rich". The Bitcoin economy lacks support for the entrepreneur, so he all-too-often drops dead (out).



NO! This is exactly the Ponzi psychology that will only serve to screw "new users" (chumps, marks). What Bitcoin needs is a going economy in order to welcome, and support, new people - as participants, not as new money to pay-off the earlier players.

Do not think, "new people, new people, new people". Think, infrastructure and engines!





No. If we don't have a going economy then we will just be exporting a pyramid scheme. A going economy circulates currency, whether that's a hundred people or a million.

Look, a harsh reality to face is that the Bitcoin wealthy are mostly just some guys who got incredibly lucky with some very low tech, and low effort, mining. Their eyes are not on Bitcoin. Their eyes are on FRNs. They want to max their cash-out and are largely ruminating on having missed the $30 exit. They remain under the Wagner-to-the-Moon spell (like so many others are in Bitcoin). This is a hoarder's mentality and investment in that mentality makes no sense.

The Bitcoin elite have got to wake-up from getting rich by letting others fall on their swords, i.e. until Bitcoin magically makes them rich. The Wagner-to-the-moon effect is OVER. From here, it's WORK.

We need the Bitcoin economy to produce venture capitalists, and in a BIG way. And this is an investment in their own substantial holdings!


Finally, this quote from FreeTrade:




BINGO

To be used as a currency, BTC has lots of weakness, and will face lots of legal resistance,  just keep it as a hobby virtual treasure

My friend, I have bad news for you.  I'm afraid you are your own idiot!

If what you say is true, then one could simply make millions by unleashing a tradebot on the market that either buys or sells whenever market prices are both (a) strongly autocorrelated "recently" and (b) apparently in some kind of quantum-physics alternate-universe where the market cap. can somehow be greater or less than itself?

Anyhow whatever you mean by market-cap, if it were that easy... well everybody would own more and more of these trade bots until the economy was destroyed by an endless barrage of sickening volatility, as speculative-bot-bubble after speculative-bot-bubble burst...

hmm, now that I think about it, I take it back, maybe you're right after all  

In all seriousness, though, you're wrong.  Although it may be "obvious" to you what is going to happen in the markets, in the future, if it were obvious to everyone else, the obviously mis-priced commodities would be bought or sold until the obvious true value of the commodity was realized, thus eliminating the profit opportunity.

This is something you get in Economics 101, first or second day of class.  Which is why I found your two statements above an amusing juxtaposition.

Remember, Bitcoin has no intrinsic value.  Speculating about the future price movements of Bitcoin boils down to speculating about the future structure of the market supply (which is not fixed to the amount mined, as people can sell their holdings) and demand (almost, but not quite, since there are things like elasticity profiles to consider... this might actually be a pretty big factor in BTC price history imo).

So the sort of tricks people try to do with equities, like comparing market cap. to book value, to erroneously make themselves feel like there is some sort of scientific arbitrage opportunity backing their capricious decisions to invest don't apply.

My own belief is that there are actually people out there with particular insights into particular markets at particular times which will allow them to make particular market-arbitrage investments such as your statements above suggest is possible.  And a sufficiently motivated and/or lucky individual might be able to cultivate such such opportunities on a semi-regular basis, and a few of those even probably work on Wall Street.

Be that as it may, with all due respect, I am sorry to say this, but you clearly are not one of them.  I challenge you to keep a regular log of your bets on the BTCUSD as if you were trading forex, with as much margin juice as you want, and no commissions and no spread.  Prove me wrong over a one month stint.

Alternatively, please explain in clear, scientifically testable terms what constitutes an "obvious" market arbitrage opportunity (or do you just have some kind of "killer instinct" where you "just know"?)

See what I mean?  If you knew that... well you'd be too busy plunging in the markets to post about it here.

One other note.  I suppose your statements could be interpreted as making the more defensible argument that you claim only to know when it is a bad time to make an investment as, for example, you might have particular knowledge that, i.e., volatility will be much higher than the market is anticipating.  But, in ultra-liquid markets like equities, there are moderately straightforward ways to actually bet on this, precisely.  For example, using derivatives markets as your bookie.  So even if you knew how to beat the market in terms of volatility/risk exposure, but were not able to translate this knowledge into a profitable commodities investment stratagem, you should nevertheless be far too busy counting your money to be tooting your horn in these forums due to your steady profits in highly leveraged derivatives.

If any of you actually give flying f about the future* of the bitcoin, do what P4man did!
Bitcoin will be fucked if it fails to attract businesses  - good and services for btc. 
If all you can do is hoard the coin and play with it in the exchange, bitcoin will not be around for too long.

---
future - I do not mean "until you have some *coins". 

While thats fine, it can be much simpler and cheaper. Just spread the word.
ive just come back from my hairdresser and talked about it. Guess what, next time, Ill be paying him with bitcoins, I kid you not.
He's not all that PC literate, at this point, he hardly understands anything about bitcoins and so I dont see him install a point of sale system to accept bitcoins from everyone anytime soon, but he liked the idea and doesnt mind getting some; as he sees it (quite correctly) basically as if Id pay him in  lottery tickets.

IS my hairdress going to change the world? Nope, but if everyone that knows about it talks about it (and hairdressers are great for that lol), that will help, much more than a few bitcoin millionaires setting up "bitcoin funds".

So next time you get a haircut, talk about it.

The smart thing would be to create/fund/invest in businesses that make BTC useful, and spread BTC.

For any one holder of BTC, it might not make sense. A co-operative solution would make sense - a co-operative funded by large BTC holders with the intention of increasing the value of BTC through various initiatives - new businesses, establishing favorable legal precedent, lobbying, etc.

+1

This makes no sense whatsoever. What exactly do you suggest they do? Sell their bitcoins? That will collapse the value and achieve precious little otherwise. Spend their bitcoin on bitcoin sites? Great, but its no different than selling them and buying the stuff with dollars.

What bitcoin needs is more new users who buy bitcoins to conduct trade. That is a real influx of capital, its not the same as existing bitcoin holders spending their coins. The latter is if anything, more likely to produce an exodus of capital if the bitcoin merchant cash out (since they buy their good and services with dollars most likely).

Current bitcoin users buying, selling or hoarding coins is not what will advance (or destroy) bitcoin. Reaching a bigger public is what will make or break bitcoins.

The rule is not "If you're a late adopter in bitcoin - you're fucked."

or "If you're an early adopter - you've won"

The rules are like this:

If you have no knowledge of economics and how trade works, and are generally not very smart, and then trade in bitcoin (or anything for that matter) - you're fucked.

If you know what you're doing and don't fuck up - Bitcoin can potentially save you a lot of time and effort.

It's not about getting rich or speculation. Remember when the price fell from $30 to $5 every step of the way some idiot was dumb enough to buy the coins at a price ridiculously high above the market cap of the bitcoin economy, even when the price was clearly on its way down. Idiots deserve losing money, thats how a market works.

That's either because you weren't early enough, or you aren't patient to wait long enough.


Yes, let's be clear [insert rehashed bullshit meaningless argument not based in reality ad nauseum]

Uh, duh. That's the whole point of bitcoin. Hoard until the price skyrockets then sell. Didn't this already happen? I'm pretty god awful positive it did.


It would be kind of silly if you didn't pay attention to the markets to what actually happened. Sure we know how many there are, but there aren't that many for sale, so what does it matter? We won't know when they will go on sale, so what does it matter?


LOL it evens out by taking money away from late adopters and giving it to early adopters. Perfect pyramid scheme with thousands of earlier adopters vehemently showing it works to encourage later adopters.

Still they will be used so still it will be usefull and after that one inflatonary transaction happend it wont happen again

21 million coins, say satoshi has held on to 100k. 1 billion people world-wide use bitcoin
20.9 million spread around 1 billion is .0209 coins per person.

satoshi sells 100k. .021 coins per person

economy has inflated 0.48%

1 billion people just lost a half percent of their net worth

1) bitcoins cant "die",
they will always be usefull.

2) for time = endless,
the market for bitcoins will become bigger because it has no disadvantage against other currencys(besides unstability which is only for short time periodes) but seveeral advantages.

3) so for time = endless,
bitcoin will be deflatonary.


proof me wrong plz !

The supply is constant, but the recent price drop have something to do with FED's tighten pocket, USD is on the rise now 

The problem with this is bitcoin is on a slippery slope right now. If they pump a lot of money into the economy, it will be as if mass inflation has happened (no central issuer here, move along folks!). Mining will no longer be profitable, and the only way to get the difficulty to change is to have people who hate themselves mining for a loss for potentially a month(s?) or more. And if mining profitability drops out, you lose demand. If new people can't make money, what is the new demand for bitcoin? Because as I see it, there is enough money in the economy to support the drug trade, and that is about all Bitcoin has going for it at the moment.

I can't see how you can expect businesses to treat bitcoin legitimately if the price just halved. And insta-conversion options for BTC->cash do not solve any problems, because as soon as demand is created, it is converted back into supply.


Suckers, imo.

FYI, here is a recent article from the BitcoinRedLight website.
----------------


For most practical purposes, there is no such thing as an ‘inflationary currency’ or a ‘deflationary currency’. There is only inflation and deflation; there is only that which is actually happening. True, for most of the time the FRN is in inflation, but following the 2008 banking debacle it went into a wicked sharp deflation.

The point is that we need to forget about “…only 21 million Bitcoins will ever be created…”. Ok, even if we all believe that to be true, the reality is that right now Bitcoin appears inflationary, and there is no guarantee that Bitcoin will even survive, let alone reach its 21 million projection or go into deflation.

There is a reason that central banks are powerful. They manipulate the game in favor of the game! Why? Obviously because they have every incentive to do so. And who directly benefits by the Bitcoin game? Obviously, the guys who have lots and lots of Bitcoins.

They gain a direct benefit by every contribution that every Bitcoin-poor make. And if they just hoard (i.e. because the price is “guaranteed” to go up to the Wagner-moon) or if they just keep weekly dribbling out their mega stash to little-stash hoarders who are also buying into the Wagner-moon hype (or worse, to TPTB who will eventually crash Bitcoin), then this whole thing is screwed because the Bitcoin wealthy, themselves, don’t believe in Bitcoin, they believe in DOLLARS.

This is why the Bitcoin wealthy are SO important right now. They are the ones who hold the keys to getting this currency into a position of circulating USE by pumping Bitcoins into the infrastructure and startups which are desperately needed to make the Bitcoin economy go.

Half the Bitcoin wealthy’s stash could be worth far more, later, if they would just pump half of their stash (i.e. some healthy percentage) into the Bitcoin infrastructure now. Mind you, since they hold the Bitcoin wealth, they would be investing in their own holdings.

And if they don’t do it, what does that say to the rest of us who are working so hard for so very little?