At this point mass acceptance is leading to lower btc price because merchants are immediately converting the btc to fiat
That makes no sense. BTC are just changing hands. To lower the price you need to increase supply more than demand.
The speed with which bitcoins are changing hands also matters a lot. This might be a driving force behind the recent BTC price decline when new sellers (like Dell) are beginning to accept Bitcoin (though this seems a bit counterintuitive, I agree)...
It is frequently said that the value of money depends not merely on its quantity but on the "velocity of circulation." Increased "velocity of circulation," however, is not a cause of a further fall in the value of the dollar; it is itself one of the consequences of the fear that the value of the dollar is going to fall (or, to put it the other way round, of the belief that the price of goods is going to rise). It is this belief that makes people more eager to exchange dollars for goods. The emphasis by some writers on "velocity of circulation" is just another example of the error of substituting dubious mechanical for real psychological reasons.[1]
http://austrianeconomics.wikia.com/wiki/InflationThis is all theory (which may not be applicable in this case), but the reality may be that bitcoin hoarders are willing now to spend their previously stashed away coins since there are many more things now that they can spend their money on. So we have both effective supply and velocity increased, which could potentially explain the decline of Bitcoin price at the moment...
Yes.
The money velocity is a neo keynesian thing. It tries to track the money as it changes hands in the productive economy, thus pure financial transactions are excluded. It has to be, because a trader buying coins one day and selling it the next day, does not touch the productive economy. Thus measurement of money velocity presents much of the same problems as the economic gross product at different levels. Some of those problems are: should we include things like insurance payments which is a result of some destructive accident, and should we include production at loss, and production where the profit or loss is unknown, as in a market with government regulation where real prices are undiscoverable.
In fact, money velocity is never measured, it is always only the GDP / money supply. In case of USD, this is quite nonsensical, as the money are used outside the scope of the GDP.
I suspect that the money velocity when mentioned, is just an excuse to cover up the mediocre economic production, where the real reason is the intervention in the interest market, which hides the real time preferences and makes the economic actors take decisions blindly, like don quijote de la lora la mancha fighting the windmills.
Here is a paper from London School of Economics, maybe it is not the truth, but interesting. I mentioned it also in the gold collapsing... thread:
http://www.lse.ac.uk/economicHistory/pdf/FACTSPDF/1306Morgan.pdfThere is only one basic reason for the value of money, and that is the demand, or the preference to hold (where supply is some actors preference to hold less) (assuming sound money). Indirectly of course, is the number of users, their savings, their view on what is the best saving, including the prospect of appreciation. The ease with which a saver can spend, is a part of that consideration, therefore new shops can influence the value negatively, hopefully only in the interim.
