Topic: Why regulation will absolutely NOT cause Bitcoin price to go down. - page 2. (Read 2870 times)

Perhaps if the utility of bitcoin were in the same universe as the utility of the dollar. Your theory only works if the basis for demand remains -- a huge assumption.

This is what you have not proven: If bitcoin enters the black market, legally viable alternatives will not take its place.

Current demand IMO is based mostly on speculation in re to store of value -- not bitcoin's use as currency. There is little demand for bitcoin as an actual currency/payment system – people don’t need it. If shit goes south, there are plenty of legal alternatives. And IMO, the average person – who bitcoin needs for mass adoption – is happy to use Paypal, credit cards, bank transfer, etc. without getting their hands involved in anything legally dubious. What will happen to bitcoin's perceived use as currency if it becomes particularly difficult to obtain fiat currency with it? It's starting to sound like the Peso! Will people be paying premiums to offload their bitcoin? 

In the case of a US government crackdown, would you expect speculators to stick around? If so, why? And in such a case, what happens to all the VC capital that perma-bulls keep going on about? Successful VCs love to invest in legally questionable ventures, don't they? Yes, any type of government crackdown on bitcoin is going to create a frenzy of investment!

Oh, drugs. Let's talk about drugs. Do you really think bitcoin could compare with illegal drugs in terms of demand?

For reference, in 1906, 25 million people were using opium (1.5% of the world population). According to the US Opium Commissioner, in 1911, US residents consumed 500,000 pounds of opium, or ~1 pound per 180 people. As for cocaine, in 1906, the US imported 2.86 million pounds of coca leaf, in addition to "large quantities" of manufactured cocaine.

Compare to size of bitcoin economy. Do you think there is 1 million bitcoin users, which would put bitcoin users at 0.014% of the world population? Give or take a couple 100,000 or so? And of those bitcoin users, how many are merely speculators, who will simply leave bitcoin during a prolonged downslide (or at the outset of panic) for other investments? Regardless, doesn't your scenario require mass adoption? Massive demand which currently does not exist?

Bittorrent? The decentralization that you speak of ... what would happen if Gox, Bitstamp, Bitpay, Satoshi Dice were to go down? (the latter won't be safe simply by ceasing to serve US residents going forward) ... and what would merchants do when they see bitcoin operators being picked off by the government?

Anyway, yada yada yada, more devil's advocate shit. But really this idealism is crazy! A lot of what I see here can only be described as pure faith ... at least be open to the possibility that our beloved bitcoin may fall on very hard times someday.

Oh, and regarding the last point of the OP, there is always the possibility that short/medium term outlook ≠ long term outlook. Or that one's outlook contains caveats that account for such things. Some of us think shit may hit the fan in the future. That doesn't mean I'm selling now.

this

You confuse legal use with actual use.
People CAN'T use marijuana in the US ... but oh boy, they sure do use marijuana!  A LOT of it.  But they CAN'T.  But they DO... because it is HIGHLY (pun intended) valuable to these people.
BTC is essentially gold that you can email.  If you don't see how this concept is absolutely unprecedented, revolutionary, fundamentally liberating on an individual level... Then yeah I guess you think demand will die off.
But it won't.  Demand for BTC can only increase from any prohibition attempts; from its essence (the revolutionary concept of a store of value that outperforms gold and is EMAILABLE [zero storage cost / no third parties necessary]).  This is utterly new to humanity; I totally understand why a lot of people are skeptical about future demand -- there's never been anything like it.
Demand for BTC has been increasing and will not stop; regulation will only add fuel to the fire.

Sorry OP, you are completely wrong and your analogies don't fit at all.

The dollar has value even if no one from Argentina ever bought one.

Bitcoin does not have value if no one can use it.

Too much regulation will hurt bitcoin and can very easily kill it. Yes, die-hard believers will hold on to their bitcoins but your average investor will panic and sell if it looked like serious regulations were coming. I know I would.

Too much regulation and bitcoin ceases to be a useful currency and that is the ONLY thing that bitcoin has going for it. That is why people want it. Anything that makes it harder for it to function as a currency will negatively affect it's value.

I might have agreed with this a year ago, but Bitcoin's essence (a store of value that outperforms gold and is readily emailed) combined with the explosion of awareness nowadays (random people I ask on the street [yes i do this habitually] are beginning to actually claim to at least have heard of Bitcoin, rather than a year ago when everyone I queried responded something like, "no - what is a bitcoin?") leads me to believe that the demand for Bitcoin is approaching the level where people will go the proverbial extra mile to obtain them.

Convertibility/Liquidity is part of the value of an asset/currency like Bitcoin. Drugs have an intrinsic consumption value and Dollars are an established world reserve currency. Bitcoin derives a (large?) part of its value from convertability, and currently this is most reliant on mtgoxUSD. A hit on that would be a hit on its use value as a medium of exchange as well as an investment option.

Right, just as stealing from a single person does not make you a thief.

Regulation of exchanges =/ regulation of Bitcoin

Ah ok, I thought you were saying that money laundering laws weren't regulations! 

I assumed this is in response the the mtgox/dwolla account seizure, cuz that is what that was about. What else can it be?

I basically agree with your appraisal of the situation OP.

I think if most major exchanges in most first world countries were shutdown, it would hurt the valuation of Bitcoin. But even if this is the case, Bitcoin would still be fine -- it would just grow a lower rate.

Even if Bitcoin was made 'illegal' in much of the world I still think the price would still rise (but at even a greater penalty). Even if Bitcoin was only limited to use as a blackmarket illegal currency, the future still looks bright.

 

What has "regulation" as you Libertarians call it (really just compliance with anti money laundering laws) to do with a fixed (non-floating) exchange rate?

"But guys, regulation will mean it's hard to get bitcoins at an exchange. If the exchanges are getting shut down, it will be very hard to get bitcoins, and no one will care about them. Demand will go down and price will fall. Regulation will be the death of bitcoin! No one's going to bother getting Bitcoins if they have to find a sketchy OTC dealer or if exchanges only have a 50% float rate."

How many times have you heard that here?

How come the exact opposite is happening in Argentina? There is an "official exchange rate" between the peso and the dollar, but that is an artificial market with no volume/liquidity - i.e. there are controls on the amount of USD you can legally buy. USD is heavily regulated in Argentina.
What happens if you want more USD than the government will allow you to buy? You will have to go on the black market, which is what people are doing. You go to a shady guy on the street corner who's whispering "dollars" under his breath and looking around nervously because BOTH YOU AND HE ARE RISKING ARREST and you are paying 100% over the 'official' exchange rate. USD is heavily regulated in Argentina, and USD price is rising despite the incredible 'hassle' to get it.

Even if BTC exchanges continue to be shut down left and right, and the government places outright controls on Bitcoins, and the IRS spies on and rabidly chases down anyone even remotely suspected of having bitcoins - price will continue to rise.

I have always used the comparisons to drugs and bittorrent to illustrate how a regulated asset rises in price, and how a regulated asset that is digital and decentralized is practically impossible for law enforcement to shut down. They haven't even been able to shut down the centralized front-end of torrents, which are the websites that provide torrent downloads. So it is not too much of a stretch for me to suggest that regulation will not affect bitcoin for the following reasons:

(1) It is decentralized, so attacks can only be effective against the front-end. (refer to Bittorrent)
(2) Regulation can reduce supply but in many examples, it does not reduce demand (see drugs, and now the U.S. Dollar in Argentina.)
The argument most often made is that reduced supply will automatically lead to reduced demand because of the "hassle" to get it. Well, it's a hassle to get drugs in America and it's a hassle to get U.S. Dollars in Argentina. Both have seen steady price increases within the appropriate time period.

I have always argued that people who think regulation will cause price to fall, while simultaneously holding a position in bitcoins (whose protocol is revolutionary in nature and is absolutely destined to be heavily "regulated" on the front-end) are in a bind. They hold a position that is incongruent with their opinion on the effect of regulations on price, and therefore should either rethink their opinion or sell all of their coins.

Thoughts?