Topic: Vast expansion of BTC utility/reputation - but no rise in BTC price? Why? (Read 5516 times)

zerk has it backwards, for most of the big run up in exchange rates the miners were holding and counting their paper-gains, when they lose profitability it will force them to START selling their newly produced coins to pay ongoing operating costs.  Coin flows into exchanges will rise not fall and exchange rates will fall not rise.  This is what happened the last time miners over-invested in the GPU era, and realized they couldn't meet ROI or even cover operating costs.

I like the dev team, and I liked the coin's design, so I bought a few back when they were still new. Now, I think they are getting lost in the sea of altcoins and just don't have enough going for them to make it long term.

No it really doesn't. Someone did actual math on this. I don't have a link to the post but its here if someone wants to find it.

The causality runs in the other direction (i.e. difficulty follows price), although it isn't terribly strong in that direction either. There are lots of other factors influencing both.

Bingo! +1

Price follows difficulty. Worry about the price when you start seeing less mining and lower difficulty (like feathercoin  )

It would be.

I guess you are right.

And these factors haven't even really come into play yet with the masses.

Well if I was a veteran living in my villa paid thanks to BTC, with a Ferrari in the garage, and enough fiat to ride the next couple of years with my remaining BTCs, I would be calm too !

I have almost no BTC and only invested into computer hardware I'm confident I can use differently or sell (IT guy) so I'm calm, for other reasons. I HODL my 1 BTC.

Correction:  When you sell, it's all paper profits.

In Reply to Dr Bloggood:

There is a global tightening of capital flows going on reminiscent of what was happening exactly 100 years ago. Capital controls, reporting requirements, etc.

Bank secrecy (at least for US citizens) is a distant memory as they live under the omniscient Eye R.S. and the FATCA that has made US citizens lepers in the world financial markets since the reporting requirements make every bank in the world a deputy of the Eye R.S. regarding US citizens ... All of those factors plus the fact that the Euro still looks like a badly constructed accord plus the instability in South America.... Etc... those are the background datapoints that make criptocoins enticing... Yes, every financial/monetary shock (and they are coming) will push more people towards criptos: not because they love them but because people with some wealth and not part of THE CLUB will try anything to salvage their $$$.

Even at that, its going to be a while.  Two more years just for the next reward halving, and 12.5 BTC is nothing to sneeze at. And four more years each time thereafter. We should be pretty safe for the next decade or two.

Many of the altcoins with their ridiculous instamine schedules are in much worse shape.

Might not have to take all of them, actually. I should have said instead "once enough bitcoins are mined out to make further mining too troublesome for most existing miners".

In 2140?

The real sector of the Bitcoin economy (use of bitcoins to pay for goods and services) remains very small. The prevalent part is speculative trading and holding. Besides Bitcoin potentially becoming obsolete in the future due to further technological progress, it poses another major risk: once all bitcoins are mined out and Bitcoin is still far from the mainstream, the speculators might start liquidating their holdings which will lead to its immense value drop. The suit will then be followed by companies and individuals accepting it as means of payment for their goods and services (who would like to find their revenue halved over a short time in the USD equivalent?), bringing the final Bitcoin value to zero. Unlike with gold, the only value of Bitcoin is in its usage as means of exchange; if no longer used that way, it will have no value whatsoever.

Right now, there's no proper modern payment infrastructure in place to trade goods and services in bitcoins. Very few rudimentary Bitcoin POS-terminals offline, the use in online commerce is hindered by the irreversible payments and a high risk of fraud thereof, unreliable amateurish exchanges (even the major ones) etc.

What can secure Bitcoin a future is an utter collapse of major fiat alternatives - a global-scale economic disaster. Will it happen in our lifetime though? I wouldn't be so sure.

You are right.  Let me reformulate.  We can see a couple of thousands BTC siting in the order books of various exchanges.  So, somebody is at least trying to sell.

No we don't.  We don't know if that was just the same 100 coins that were sold 100x each.  You need to factor in "Bitcoin days destroyed"

It's the calm before the storm

we just had a big rise, and probably got ahead of ourselves. Now we've got to wait until people are used to thinking ~$800 is a reasonable price.

Production costs might determine price, or it might be the other way around. That's a complicated topic and should be looked at on a case-by-case basis.

I think the more common thing is something will cost as much as the costs of its production, transport, etc., plus an additional amount for gains of the producer.

I wrote a longer post about this in the thread about gold.

That's a very interesting thought, and even if it isn't the entire reason for rising price, it still could be a (big?) part of it. I guess we will se if you are right in March/April.

Let's do some maths - how many BTC will be held by the miners at the end of March (I know nothing about mining)?

Also, how do you get to the date of March 31st? And are you saying it hasn't been profitable to sell since Jan 1st, so that's why miners have been hoarding from then on?

So, in your dream world:

-speculators are hodling
-miners are hodling
-hardware manufactures are hodling

So, everybody is hodling.  Yet, we saw 10k BTC sold in the last 24 hours.  So, somebody is selling, we know that for sure.   

Not all of it no.


False in general. True in some cases.


I guess we'll see. If there is a lot of hoarding, the price will go up.

So, most of the miners got scammed and sold hardware that is too expensive, and they will lose money.

Tough, they made a gamble and lost.

Then you say that this means that the price should go up so that they do not lose?  Yeah right, keep living in your dream world.  

That's not how markets work.  Cost does not determine price.  If miners don't want to sell for less than 6k or whatever, there will be others that do want to sell, perhaps because they bought for $15 a year ago.

If all the BTC holders want to cash out at this point, it would simply be impossible at current prices.  The depth is not there.  Until you sell, it's all paper profits.

The hardware they purchased is vaporware, they can't resell it, maybe 1% of them can to retards on ebay. But the main reason is they could be lucky to pay off the hardware cost, and/or electricity. After that the difficulty makes sure that you won't be making anything of reasonable value, any coins generated from then onwards are hoarded.

This isn't even true. You can still buy miners which will very likely have a positive ROI, you just have to be very, very careful and selective about it. High difficulty can never preclude a ROI, only an imbalance between difficulty and costs.

I have no no idea if miners will increase their hoarding, but if they do it will be positive for the price, that is true.

Just wait until the bitcoin miners reach the point where they realise they won't get a ROI on their mining hardware with the increasing difficulty, which came to realisation a few weeks ago. They have begun hoarding when it is mathematically impossible to get a ROI. Less coins on exchanges over peroid of 1stJAN-March31st creates artificial scarcity. Around this point or after you will see a huge price hike, to a price where people who got in the game past 3-4 months are able to receive their ROI, which is at least 2x current price. The subsequent increase in price will attract a wave of media attention and more pyramid blocks will come to buy-in. Greed is the self regulating factor from mining manufacturers who are mining with the hardware as it comes off the production line. The pyramid will continue folks!

+1

Good post! So you think it's more due to external factors than cycles, time frames, etc...

I was thinking about cycles too, for example the stock market does have very applicable cycles. Eg when you only hold during the strong part of the year every year, and are out of the market during the other time, you would have made a multiple of gains during the last years and decades (this is just to explain a cycle, BTC is strongly expanding so would follow its own patterns).

link to the 1 year chart:  http://bitcoincharts.com/charts/mtgoxUSD#rg360zigDailyztgWza1gSMAzm1g50za2gSMAzm2g200zi2gVolzvzlzp

March-April -> Cyprus ramp
Oct-Dec -> China ramp.

---> next ramp will have an external booster same as the 2 before.  Periods of "stagnation" are the points where future vendors/today's hoarders are accumulating the commodity at a steady clip while overall supply-demand equation remains stable.

The external booster will be monetary/financial in nature, hard to predict but most likely Eurozone, although i wouldn't discount a chinese solvency/liquidity dislacation as possible source of monetary shock. i discount USD trouble this year... i might be wrong.  The end result in any case is that when fiat money (no matter which government issues) shows valuation and/or liquidity troubles, BTC demand  shoots up, therefore price corrects to a new supply demand equilibrium.

Pretty much that. Keep in mind though, just because they are using coinbase or bitpay doesn't mean they necessarily have to sell. That is an option in the APIs. Overstock's CEO for example, recently said they won't necessarily be selling all their coins and will be looking at using them to pay employees and suppliers.

Up until now these companies have been selling up front. If that changes and they start holding or building up a supply chain of vendors (and employees) who receive Bitcoin then the whole thing becomes more useful and more people will want it.

One issue (good or bad depending on how you look at it) with the Overstock and Tiger Direct is they get the companies into the headlines but since they don't offer the customer any incentive for using Bitcoin, usage will remain quite low. With credit cards many get points, frequent flier miles, cash rebate, etc. For the customer in these cases using Bitcoin is a loss. These companies need to share some of the payment-processing savings with the customer, not try to keep it all. (A counterexample is Gyft, which gives a 3% rebate for bitcoins -- that is probably too high, but a good deal for buyers.)


You have no way to know how rare that is or isn't. There are certainly people with moderately large to very large holdings from anywhere from six months to five years go who don't need to refill their wallet just because they spend a little. There are also people who need to buy every bitcoin they use. But as I explained earlier this latter group doesn't benefit from paying with BTC at Overstock or Tiger Direct; they are better off using a credit card.

There wasn't a whole lot of big news as far as merchants go in 2011, other than the Silk Road. I predicted back in Oct that the price would hit $1000 late January so the quick rise I felt was a little too soon when compared to the difficulty increase imo.

I think the biggest problem is that people trust the news cycle too much. If you ignore it, you'll find it easier to buy on bad news and sell on good news by just following the numbers.

I guess his reasoning is:
When you spend your bitcoin, it is essentially you send the bitcoin to coinbase/bitpay, and the sites sell bitcoin.
The more people spending their bitcoin on Tiger Direct or Overstock, the more selling orders are set up.

I agree with others, weve seen a massive increase to almost $1000 since november and most of the good news since is priced into this.

Its nice to see a bit of stability in the price over the last month, i think the next big move will be to $10k when we get some of the big players falling in like dominos.

Hope this happens over the next 12 months.

 

I can absolutely not follow that reasoning, because for a shop to exchange its earned BTC against fiat, that shop has to have earned those BTC from a customer, and that customer must have bought his BTC from somewhere. And if he is spending BTC of that amount regularely, he also has to buy BTC regularely. So it's all a zero sum game, but BTC gets more used and more bought, so that's good for BTC.

It's not like BTC are just sold at the exchange by a shop and price goes down. That would really only apply if somebody took a chunk of their BTC savings (meant as savings indeed) and bought some goods and never bought BTC back to fill up his BTC wallet. Which is the rare case.



Can you put up that calculation for us? Would be very, very interesting to see!

That's great to hear, coming from somebody who has been in this game for that long, and obviously successfully.

I have a question though: Back then, was the cycle of business expansion/rise of BTC price seemingly out of sync as well? It seems like they are not happening simultaneously at all, and I'm wondering why.

I thought this would've been massive news and caused a price spike... but nothing.

I'm going to chime in here because I've thought about these issues a lot.

First I'll say that I agree with almost everything on this thread, especially the comments about money coming in from China, and then getting blocked. Kudos to everyone here for having a pretty good grasp of what's going on. Much better than I remember the Economics subforum (It's been a lot while since I browsed it.)

The thing is, BTC doesn't go up because you can use it on Tiger Direct or Overstock or anywhere else. It only goes up because more people want to buy it than sell it. It is also true that in the short term these deals create downward pressure, not upward, because they provide another method and another reason to sell (exchanging for other goods is the same as selling). Long term these deals can help if there are enough of them to create a large economy where people buy, hold, and spend all in BTC. But that takes more than a few of these deals.  A lot more.

There is actually a direct and fairly simple relationship between the net amount of money coming in and the price. You can work it out yourself if you set up an equilibrium equation.

BTW, did anyone notice the news about BTC China reopening for deposits? If that holds it could be big.

Pretty much. The price has gone up hundreds of dollars in just 3 months. If any security on the stock market went from $150 to $850 in 3 months, people would be going nuts. In Bitcoinworld, people feel its not happening fast enough.

As far as being here from 2011 - I got super stoked watching the price go up to $30, and watched and read countless stories and vids about how bitcoin was going to zero in the months that followed. It spent the remainder of the year and much of 2012 languishing in single digit prices before finally cracking $10 again- and that was huge news at the time.

So yeah, just be patient. Buying crypto at todays prices will make you look like a genius in a year or two - count on it. Just be patient.

Services like Bitpay are just a one way shortcut to a Bitcoin exchange.  Surely, if money starts flowing in and out of exchanges, you would not consider that an "expansion of BTC utility".

In fact, with more one way spending with instant conversion to not BTC money, you would expect the price to fall with it.

They would work except that there would be 80 times less money to work with.

edit : my bad I hadn't seen the new posts.

I agree with the guy that said be patient. I think it's just stabilising for now preparing for a new spike soon

Yup, I feel ya!

Very well put.

Yeah, my thoughts exactly.

Someone above asked what businesses couldn't run with BTC at $10... it's not that there's 1 particular... it's that the whole economy at $10 is only $210MM (actually like $130MM or so right now).. that won't support many businesses, especially ones that would like to go 100% BTC.

Bitcoin needs to be $10,000 or $100,000 (i.e. $210B or $2.1T) if it hopes to capture significant share.

But it can't go there unless it's a compelling value proposition to users. Not there yet.

Also, the overhang of people who will be super-rich (and super-duper-rich) at $100,000 is a problem. I wish bitcoin had seen a quicker uptake so even out the distribution early. Alas, I was a late-comer.

This is my thought:

The Q4 2013 price spike was a bubble because the price increased without proportion to the utility.

The utility has increased dramatically stabilizing the bubble so now it is no longer a bubble, rather a support base...

From here the price can spike to a new bubble or can slowly increase as additional utility and adoption comes along.

I expect a new price spike followed by even more dramatic adoption and increased utility. Lather, rinse, and repeat...

Finally - somebody who has held his account since May 2011... and that's all you have to say?

There would be (and was) a lot less interest in BTC at $10, so most of them wouldn't be in existance, I think that's pretty obvious.

For a good guess as to which ones wouldn't be in existance, go back to the time at which BTC was at $10, and take a look at the BTC businesses that were in existance back then.

I'm talking about expansion of the currency and it's usage.

Too bad there isn't some product that everyone wants, but is exclusively available for purchase with BTC.

There needs to be some really big news really for the price to spike. It's got off to a slow start this year but I'm sure it'll grow nicely during the course of the year.

I mean all of them.  But mostly Bitpay, their customers, and businesses that take BTC directly. 

Name one that would not work today if Bitcoin was $10.

Be patient, OP. 

What are you implying, can you get more specific? And by "BTC business", do you mean some Service like Bitpay or a BTC exchange or businesses that accept BTC as payment?

Name one Bitcoin business that would not work today if Bitcoin was $10.

It has increased too much lately, that makes many of us reluctant about buying more. Even if it seems like it's a good buy, it makes us feel stupid for not having bought a few months earlier for a much lower price.

Actually the price dropping would not help either, what is needed is stability.

The late XBT price explosion is hindering it's value for payment because the price was growing a lot faster than the acceptance aka merchants accepting XBT.
The high price actually reduced XBT to a commodity like gold.

We should all wish for end to the december "bubble" - well, except for the speculators - and return to a reasonable price level to give an incentive for buyers AND merchants to get into (aka buy) and trade in XBT on the increasing number of acceptance points.

I can't agree with you guys on lack in utility being the reason. BTC was even less useful as a currency when it was at $300 or $50 or $1 - but it has risen back then as well! So obviously that's not what's holding the price back.

It would be cool to get the opinion of people who have been into BTC for at least one year! Most previous posters have just signed up recently.

Anybody?

Yes, I have to agree. It's good to have this infrastructure, but most people just don't need bitcoin. Even if amazon would accept bitcoin I would love it and use it, but I won't buy more bitcoins than I do now. It may be a basic attribute of a currency you can take it with an atm and buy things with it on amazon - but it's no special feature. You can do both with traditional currency. And, hey, with traditional currency there are no fees. To get bitcoin at an atm cost 5-7%, to sell it on, imagine, amazon, 0.0001 btc. It costs time and money to use bitcoin. The opposite should be real.

Maybe porn. Maybe software. Maybe international crowdfunding or coworking or freelance.

I hope it wouldn't become illegal file sharing. This wouldn't work out well for us ...

Exactly.  Why are people going to go through the hassle of learning about BTC, then the hassle of acquiring it, just to shop on overstock.com.  It is going to take them longer to acquire the BTC, then if they just ordered the item in the first place.  Until these merchants put in some sort of incentive to use BTC on their site, it doesn't look like it will encourage more people to adopt its use.

The reason Bitcoin price doesn't rise because there is No Demand For It.
Yes, the acceptance has grown but people don't have any reason to buy BTC to purchase stuff.

The reason that bitcoin price was exploded in December is a lot of Chinese wants to move their wealth out of the country.
Of course they still do now but it's lot harder, since government is trying to stop it.

My thoughts (I agree with most of the stuff above, just adding to the list):

1. 90% still treat it like an investment. Sounds like you do as well. Investments101: You buy when you think the price will rise. Let's say you bought in summer 2013. You bought because you were speculating more adoption, services, etc. Price skyrocketed; congrats. Now you sell out (as many did when it was >$1000), or you continue holding IF you think there will be a continued price increase. We EXPECTED ebay/newegg/TG/OS to accept bitcoin. That was priced in. We expected more hazy regulation; that was also priced in. What WILL affect the price is if there will be a 'shocker' no one expects. This can go both ways.

2. [most] Merchants currently accepting bitcoin may affect the price negatively because they essentially dump it on the exchanges. When you use bitpay, you are selling your coins for fiat, not transferring it to the merchant. This adds selling pressure so the effect of 'X now accepts bitcoin!' is ambiguous - good because it creates more intrinsic value for BTC but bad because it adds sell pressure.

3. I agree with your 'lag' argument. For new money to come into bitcoin, first there needs to be a good reason to do so. So as we develop more infrastructure, and get more acceptance, then people might buy in.

3b. The issue though is that before you could claim 'exponential returns!' and thus we had a lot of new money coming in and hoarding bitcoin as an investment. Now, it's a bit more difficult to say that because we had a  'top' or a 'peak' at ~$1200/coin, and the price is cooling - much less exciting to put money in as an investment unfortunately.

I would be okay if bitcoin stayed at one price because to me stability is more important than a price increase. If you really want to see your wealth grow; start mining something, release an epic altcoin, start a business or invest in the stock market or penny stocks. Remember there is no free lunch.

Interesting. This is IMHO the only use / purpose of altcoins.

Many are pointing to market manipulation coming out exchanges in China as one reason.   http://www.coindesk.com/reality-chinese-trading-volumes/

Other reasons people have mentioned hold truth as well

1. Is the price actually being partially supported by multipools trading alt coins for BTC?

2. There is still trade in China and the Asia region, but the China policy on limiting fiat connectors and some merchants has slowed expansion into the wider population and this has subdued price increases.

3. Lack of clear regulation has prevented start-ups from going on a marketing drive to promote their new services.

4. China has a lot of problems with funds that lent out $1trillion over the last few years failing to meet their expected returns. This is causing financial stress amongst those put money in.

5. BTC is at a self-supporting level at the moment with the players already around and a slower than Sept-Nov 2013 expansion in its user base.

just my thoughts on what is going on with the price.

As a currency, its price vs other currencies doesn't matter per se, it's only rising because some people see it as a commodity, which is not necessarily a good thing to get a lot of people on board. You may be ready to put large parts of your assets, your salary, the fruit of your business, etc., in bitcoin, but most people will stay well clear of doing that.

it went up a shit ton already, dont forget it was hundred bucks few months ago

already priced in.

So over the last 2 months we have seen expansion with BTC on many, many levels: For example, a whole bunch of new BTC ATMs were installed, many more people have heard of BTC now (does your auntie know what it is now?), a lot more businesses are accepting BTC, the MSM press is suddenly filled with articles about it, new services popping up everywhere - but the price has not been rising!

Now you could say I'm way too impatient, the price has just quadrupled or so, and of course BTC evaluation has made huge progress, but that was longer ago than all those innovations taking place. So why is that?

Is this about cycles (fundamental expansion/ price expansion and contraction), or is it simply that price lags a bit behind the fundamentals (how much? wouldn't we have to see a new spike in prices soon? how many people are standing on the sidelines waiting?)?

Maybe some seasoned bitcoiners can tell us their thoughts: How has the expansion played out so far in past cycles (crash last spring, etc..)? Any coherences?

For example, I heard about BTC for the first time in March 2013. It wasn't until December 2013 that I put some money into it though. Maybe that's the ordinary way it goes psychologically - there is just some "incubation period".

How long did it take for you between hearing about BTC and investing in it?