Topic: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion - page 32113. (Read 26472427 times)

Bitcoin does have utility, and it is filling a serious gap in a world that is looking for alternative ways to store wealth in an increasingly unstable financial world. I live in a city that is currently experiencing a condo boom/bubble that is largely the result of asian money looking for a way to hedge their holdings. Bitcoin is starting filling this niche. In the future, Bitcoin's utility as a transactional medium will be realized with increased market penetration and a mature ecosystem of services.

an investment produces something, it has utility.  investing in a worker and a taco truck, produces a return.  buying something and hiding it produces nothing.

the present value should already contain all discounted future value, which is anticipated by market participants.  although one could make an argument that market participants are growing temporarily driving up the price.

so then we may have what is called a liquidity trap in the bitcoin world.  which would result in deflation (higher btc price)that we are now seeing but it is not a long term innovation value driven bubble by a change in the rate of adoption and rate of tx growth.  

IF that is the case, then as soon as the speculators run out of powder and whatever other reasons others may have for hoarding the crash will come , unless tx rates increase dramatically.  it could happen, i just don't see it right now.

this is not to say that the price cannot go up, it may for some time, until people realize that there is no additional value from just buying the stuff and not doing anything with it.

You and Rick Falkvinge of the pirate party.
http://www.reddit.com/r/IAmA/comments/1owf4v/im_rick_falkvinge_founder_of_the_first_pirate/ccwbao9

Buy and hold! Is hard to beat.

Don't be sad.  If you brought the story correctly, they 'll probably buy in a year earlier than they would have without your advice.  It takes some getting used to the idea.

I have been telling people about Bitcoin for more than 2 years, making them "aware" of it while trying not to push it hard, and recommending the, "not more than you can afford to lose" approach. I have always believed that Bitcoin is just too important to ignore, and has too much potential to not invest SOMETHING in it, even it it is a very small amount. Investing $100 at any point during late-2011 and 2012 would have yielded between about a $1500-$10000 return as of today. That's crazy! All in all, I'm sure that I have told no less than 40 people about it and not one person has bought in. It actually makes me kind of sad.

You're absolutely right. The two drive each other, and merchant adoption is the final fallback for the price, at least theoretically.

The problem comes when people look at the price and say it's not justified by merchant adoption or transaction volume. Store of value and medium of exchange (SoV and MoE) are the two giant dynamos driving Bitcoin adoption, but while MoE is the ultimate theoretical grounding for the price, SoV is what the vast part of the actual price level is determined by. I think it's like 95% or 98% store of value, the rest being MoE. That may be one reason the SR shutdown barely affected the price even though it supposedly had a million users (inflated of course, but had to be at least 100,000 or more, and a lot of money was being moved).

So I think the biggest near-term drivers will actually be things like IMF haircuts and capital controls more than new merchants. The major commercial adoption will come later.

As that post on reddit put it, "The [investors] that invest based on a sound assessment of Bitcoin's future potential serve as a proxy for actual present commercial adoption by boosting the price in the present to a degree commensurate with how likely commercial adoption will be to take hold in the future. To misunderstand this is to misunderstand investing itself, as well as to misconstrue much of what is happening in the Bitcoin world."

I think merchant adoption is an important prerequisite to the "store of value" function though.  It gives bitcoin the initial legitimacy it needs to survive.  Once confidence is built that you will be able to utilize your bitcoins in a meaningful way, then it makes sense to save in bitcoins.

I think the reason store-of-value as a price driver isn't talked about more is because it's sort of taboo. To those who are less familiar with Bitcoin and its potential, it makes Bitcoin sound like a ponzi scheme the more store-of-value functionality is emphasized. So there's a taboo on pushing that angle. Of course there's always a taboo on saying, "Buy this thing (which I, uh, also just happen to own) because it's going to go up massively in price!" Nevermind that that's about the best, most generous, most helpful advice you could have given anyone at almost any time in the past four years; it's just not socially OK to do.

People also naturally tend to speculate, whereas merchant adoption doesn't come without proactive efforts, at least in these early days. So there's all around a large bias toward hush-hush on the store-of-value aspects. The problem is that people then get confused about the investment aspects and what's driving the price. But socially, that's not considered something you have any obligation to help people with, and people often aren't very grateful even when you do help them and even when you can prove they would have been wealthy by now if they had just followed your advice. The human mind just doesn't work that way.

it's just the ultimate financial instrument and everyone will start realizing it in the next years

i would have to go with this and add that...

some never reported their btc income a couple years ago when they mined it or were paid for services  (maybe didnt know what to do with it and it was monopoly money at the time) and don't want their btc showing up at places that have instituted KYC...  you know what happens to money assets that you hide from the US govt after 3 years right... not saying it is right but that's the way it is...

Haven't actually thought about this but I think it must be pretty spot on. A lot of early adopters (miners) sold their coin during the early days and a lot of criminals kept accumulating wealth and not spend it on themselves, but resupply, etc.. Now due to the crackdown on SR they aren't moving a finger.

Wouldn't be surprised if now a lot of the btc that used to be for sale (by criminals) are off the market for a while.

You beat me to it 

I agree with you on the fact that I think it is too soon for another bubble (although the current price action seems to disagree).
However, I don't think number of transactions is the only measure for utility.  It measures bitcoins utility as a medium of exchange (although people can obviously mess with the metric to try and influence the market), but not bitcoins utility as a store of value.  When people are convinced that bitcoin will be around in the future, they will feel safe to park some percentage of their wealth into a "bitcoin savings account", also known as "hoarding".  To me, this is a legitimate use for your bitcoins.

Its probably fairly likely that people will get sub-200 BTC at about a week from now when Bitstamp finally hits the wall. Gox generally follows, even though the fiat is stuck. It'll be interesting to see how big that correction is. It might be your last chance ever to get sub-200 coins.

Another theory about why there is so little resistance to the current climb:

1) many of the largest bitcoin holders were criminals and/or money launderers; and

2) ^ have been scared away from the major exchanges due to regulation and government actions over the summer.

I think it's a myth that Bitcoin's value mostly stems from transaction value or merchant adoption. The real driving force is long-term investment. Or rather, the value does stem from transaction value and merchant adoption, but not present transaction value or merchant adoption but future transaction value and merchant adoption. One of the things that investors do is drive up the price of things that will serve a valuable function in the future, since most people won't buy them now since they're not valuable for that purpose now.

So there's a complex relationship through time between store-of-value pricing and medium-of-exchange pricing, with store-of-value/investment being by far the bigger of the two, even though it itself is largely powered by prospects for eventual medium-of-exchange pricing. It's that kind of complex interplay through time. Nevertheless, there's a reason why the old holders don't sell much: they believe in the future potential, and they know that even if it takes years to get there the price would have to appreciate wildly fast to be ready by then.

This post explains it much better.

Here are some figures from the BIT investor's presentation. Note how miniscule e-commerce and remittances are compared to simple store-of-value functionality, which is an area where the advantages of Bitcoin are just as pronounced - if not more.

look at this tx graph  https://blockchain.info/charts/n-transactions?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

the # of processed tx is a proxy for utility, earlier this year we got rid of dust tx and you could see the decrease, and now an increase which means that some new value has been brought in but we are not talking 10X yet. in the last bubble the magnitudinal (10x) tx increase preceded the massive (10x) price range shift

If people are hoarding, it is because they believe that the value is higher than the current trading price, no?

 

ty;dr;

say bye bye to 200 

But so much has changed.