Topic: what is killing bitcoin by drastically deflating it? - page 2. (Read 3397 times)

Savings and capital accumulation is a benefit of a deflationary currency. But stability is important. Not going to have that this early in the game.

I just got this real crazy idea.

What if Bitcoin encourages people to stop spending more than they need to buy?  Since by holding BTC you're likely to become wealthier, thereby decreasing the need to spend frivolously, people would hold onto their coins and spend them only when they had to, such as for food, shelter, and the recurring payments of entertainment--and everything else would be only if they really mean to spend, as on their business ventures or schooling or whatever else.  On the other hand, with fiat, you're encouraged to get rid of it ASAP on whatever it is you need or want.  Capitalism seems to favor an inflating currency, as people are more likely to get rid of their cash by either buying or investing in something else (but average Joe seems to prefer to buy.)  Therefor, more money runs around, the economy (is supposed to) keep moving, la-de-da.

I think a society that's more focused on conserving their cash (and thus, their resources) is much better off than the society that must eternally spend and expand.  Maybe people won't waste their hard-earned money so quickly then, and won't be so easy to coerce into giving a bank for gambling purposes--I mean, investing.  This system seemed to work well when we needed to spend and expand, but now that phase is over, and the cup keeps spilling over.

Spot on.

Although a rapidly rising commodity brings smiles to all faces who are holding it, it also discourages people holding it for exchanging it for goods, services, and indeed Fiat currency. Now, this is when things are on the way up. On the way down, the volatility will destroy people using Bitcoin for real world economic transactions. Either way, the volatility cannibalises that which underpins the basis of the whole 'value' of Bitcoins.

Seems like there are a lot of smug types around here who think the whole Bitcoin universe's behaviour is running in accordance with their own personal simple world paradigm of how things should work. My word of warning to such people is that they should perhaps consider the possibility that perhaps they are not as smart as they think, and that perhaps they have merely got lucky, inadvertently hitching a ride on a dragons tail wings. True, that dragon may soar and spiral ever higher into the heavens, taking everyone with it along for the ride. But when that dragon dives, it will nose down right into the flames below, revealing to everyone, their false illusions regarding what is driving Bitcoins.

Do people forget what happens when market value far exceeds the underlying assets supporting it? Housing crash 2008 anyone? One thing that I could safely bet my own house on, would be that the market value of Bitcoins, is exceeding the underlying economy which supports it, by an order of several magnitude at the moment. For anyone to 'invest' in Bitcoin now for purposes of speculation, they would be doing so on the premises of 'greater fool theory' (a bigger fool than themselves will come along and pay even more than they did at some point in the future). As for the posts I have seen where people are discussing putting their pension funds into Bitcoin...OYF! 

well the time of flight for light to mars is about 20min. so don't get your hopes up about mining for bits way out there. although transactions would still work perfectly fine supposing you had a downlink to an earth based station.

but coming out of the sci-fi scenario for a sec, depending on the business you do, having a script in place to adjust the sale price of an item to the bitcoin spot is trivial. and thanks to the nature of bitcoin one can even have the BTC amount sent to an exchange and traded without user intervention. For a merchant this would lower the currency risk substantially.

lets take this thought to its next logical step:  I see a current hole in the bitcoin economy for a brokerage like service to handle and simplify such an exchange. if a service could be built with enough liquidity it would open the market up to many more merchants as well remove a bit of volatility from the exchanges.

But what if you put Bitcoin on a rocket and flew it to Mars?

Keep your menu price in local currency, use a BTC quote at time of checkout. It's not rocket science.

Re: price swings and how they affect merchants - there's a menu cost. You need to change your price as BTC moves around since your inputs are likely denominated in your local currency, but your output is priced in BTC.

soon i thinks 

BTCWhen do you think it will reach $100 USD?

I have a feeling if it starts dropping it will go down as fast as it went up with people trying to lock in their profits.

I wish the price would stabilize

Until it finds its place in the economy and such, it is going to go through these wild fluctuations. What you can do is predict them and find out when they are going to occur, so you can do what favours you

wow what a good idea.  troll-killer for sure

Yes...I'm sure all the bitcoin retailers are just loathing the dramatic increase in the price of the bitcoins that they are receiving

Now that someone was kind enough to write https://www.bridgewalkerapp.com/ we can finally put an end to this nonsense.

If you are "afraid" of the fact bitcoin keeps going up in value, you can use this app accept and spend BTC, while holding dollars. You will be 100% protected from the horrible "volatility" that every Bitcoin holder I know of is actually thrilled with.

I have to say, hats off to the author. I suspect hardly anyone will use it, but it's the best troll-killer ever.

Trading can only reduce volatility and never eliminate it because steadily rising prices causes people to make leveraged buys, which swings the price up. For example since the USD prime rate is 0.25% a major bank could push hundreds of billions of dollars into Bitcoin by borrowing from the fed at .25%. When they sell Bitcoins to pay back the loan it swings back down.

      

I guess, that would be frustration - more $ could be made by doing nothing.

A few weeks ago a merchant that sold an item for $100 dollars worth of bitcoins got paid about $100 dollars worth of bitcoin.  If that merchant then used those coins for making purchases or cashed them out, that merchant got about $100 dollars worth of value from them.

Today a merchant that sells an item for $100 dollars worth of bitcoins gets paid about $100 dollars worth of bitcoin.  That merchant can then use those coins for making purchases or cash them out and that merchant will get about $100 dollars worth of value from them.

What is the difference for the merchant between the situation a few weeks ago and the situation today?

Now if you are saying the merchant may not want to hold bitcoins at this higher valuation because the risk of the exchange rate decreasing, then there are methods for merchants to hedge, such as buying PUT options or to sell futures contracts on ICBIT, so that the merchant can "lock in" at today's value yet still hold that value in the form of bitcoins.  

Ideally though, the merchant will have vendors, employees and investors to pay so that bitcoin revenues can be used for that spending rather than simply getting cashed out to fiat as part of each transaction.