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Bitcoin hits $200

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Re: Bitcoin hits $200

#91

Post by drcode »

olalonde wrote: post #61
dancesdrunk wrote: post #50

I have merely a passive interest in economics, but my two cents: There was an (anonymous) article a while back from someone who ran an [I believe a small] exchange, whereby he could manipulate the buy/sell prices to his advantage (driving up BTC price) - and I can see that happening very easily; I don't know what sort of algorithms Mt Gox (or any exchange) runs for it's immediate buy/sell spot price, but a simple var…

As long as there are multiple bitcoin exchanges, it will be very hard for a single exchange to influence the price of bitcoin thanks to arbitrage traders.

Therein lies the problem: MtGox is so huge so that even though it's not a monopoly, I'm not sure it doesn't operate as a de-facto monopoly when it comes to price determination.

Re: Bitcoin hits $200

#92

Post by tomp »

caf wrote: post #75
tomp wrote: post #32

Earlier quoted context omitted.

The alternative possibility is: the amount of bitcoins kept for trade significantly outweighs the amount of bitcoins kept as an investment. Then, the price (in $) would roughly equal to the ratio of the amount of money circulating in the society over some period of time (in $) the number of available bitcoins. Thus, bitcoin would probably be worth somewhere between $100,000 and $1,000,000.

It's worth keeping in mind in mind that the equilibrium total mining power consumption is proportional to the price of a bitcoin in terms of the amount of electricity it can purchase. With the current mining rate of 150 bitcoin per hour, a bitcoin price of $100,000 implies around 100GW of power consumption for bitcoin mining (for comparison, a large thermal power station has around 1GW of output). That's a lot of ene…

Yes, but in time, the mining rate will drop, and the energy loss will be reduced significantly.

Re: Bitcoin hits $200

#93

Post by aychedee »

soapbeard wrote: post #46

One thing I don't get about bitcoin is how the transition from paying for mining to charging for transactions is going to be handled. This seems like a big upcoming change now all this money is sloshing about. I take it the plan for transaction fees is carefully worked out to make it still be attractive to miners and merchants vs charges for visa etc or have I got the wrong end of the stick?

There is no transition required. When send an amount of bitcoins to another address you specify how much of a transaction fee you are willing to pay to the miner who solves the block of transactions your transaction will be included in. Any given miner can prefer to solve transaction blocks with higher fees. Eventually it will get to the point that if you don't include a transaction fee your transaction will just be ignored and not included in the block chain. At the moment it will probably be included anyway because of the inherent reward for creating a valid transaction block.

Re: Bitcoin hits $200

#94

Post by aneth4 »

dragontamer wrote: post #85
aneth4 wrote: post #59

Earlier quoted context omitted.

> Cashing out 100 000 BTC would crash the market down to 0 - right now the MtGox has exactly 105 708 BTC in the order book. All demand is not reflected in the order book. In fact, most demand is not. The more sophisticated a trader is, the more likely he is to use limit orders to manipulate the market instead of the rather stupid move of telegraphing demand. If the market went down 10%, a flood of buy orders is not u…

If the market went down by 50% however, and then stayed low for an extended period (maybe two days), then a flood of sell orders will definitely appear. It works in both directions, people who are speculating on Bitcoin will be easily spooked by a medium-term crash.

Of course. Not my point though.

midnightsine is pulling his numbers from limit orders posted on MTGox. I'm saying that's not an accurate measure of what it would take to send Bitcoin to 0.

Re: Bitcoin hits $200

#95

Post by aneth4 »

dragontamer wrote: post #87
Diederich wrote: post #62

Earlier quoted context omitted.

I've been asking my friends what they would consider the threshold for BTC to be considered a 'serious' global currency. We agreed that if it had $1T USD equivalent value, it will have arrived. So, 22M BTC valued at $1T USD comes to $45K USD/BTC. I have invested less than two thousand dollars into BTC. I consider it an epic gamble, but honestly, not an enormous one. On the other hand, if BTC does 'go long', I could v…

At what point would an airplane be considered "heavy" enough to fly? Some people agree that when its about as heavy as other planes. Asking the wrong questions is silly. When bitcoins are used , that is when they'll be a serious currency. A bitcoin enthusiast should be looking at the number of bitcoin transactions and hoping it rises. The price of bitcoin is irrelevant to its value to consumers. On the contrary, the…

The price is relevant to merchants though. It's much more appetizing looking at $2B in bitcoins than $200M. Price increases drive adoption, which drives it's value, which drives price increases. That's what we are seeing now, though not in rational proportions. Price stability is likely to affect consumer behavior, though unclear how much.

Re: Bitcoin hits $200

#96

Post by sfjailbird »

BitCoin reminds me so much of the early days of the internet; the ingenius technology, the promise, the hype, the misconceptions, the rampant ill-informed speculation. And of course the few neat things it could actually do, with a promise of so much more to come.

And perhaps, the dot-com style bust at the end that puts things back in perspective and paves the way for real growth and adoption...

Re: Bitcoin hits $200

#97

Post by dragontamer »

aneth4 wrote: post #95
dragontamer wrote: post #87

Earlier quoted context omitted.

At what point would an airplane be considered "heavy" enough to fly? Some people agree that when its about as heavy as other planes. Asking the wrong questions is silly. When bitcoins are used , that is when they'll be a serious currency. A bitcoin enthusiast should be looking at the number of bitcoin transactions and hoping it rises. The price of bitcoin is irrelevant to its value to consumers. On the contrary, the…

The price is relevant to merchants though. It's much more appetizing looking at $2B in bitcoins than $200M. Price increases drive adoption, which drives it's value, which drives price increases. That's what we are seeing now, though not in rational proportions. Price stability is likely to affect consumer behavior, though unclear how much.

No. Speculators like looking at that value.

Merchants want the opposite. Merchants right now are pissed off because they just finished setting their prices at 1BTC per widget four months ago, but today they're only getting 0.1BTC per transaction.

Merchants are receiving less and less bitcoins everytime the price goes up. Merchants want BTC to go down, so that they can sell the same stock for more BTC.

Its like the whole thing that happened to the Japanese Yen between 2008 and today. As the Yen strengthened, Nintendo lost money. Even though the Wii was selling in record numbers, Nintendo lost revenue as the Yen grew stronger.

Similarly, a Merchant based on BTC today is making 10x less bitcoins per transaction. That is BAD for business. Furthermore, merchants are now forced to consider the highly fluctuating exchange rate as part of their business.

Re: Bitcoin hits $200

#100

Post by GaryRowe »

midnightsine wrote: post #54
gerhardi wrote: post #51

Earlier quoted context omitted.

I'm along your lines. If I happened to have a stash of bitcoins in my pocket, I'd be very careful about actually buying anything with them today, as the next week they would be more and more valuable. So I think the deflation is the main reason why I don't feel comfortable with idea of using bitcoins as a currency for buying anything - selling might be a different story. edit: How large volumes of selling bitcoins fo…

Cashing out 100 000 BTC would crash the market down to 0 - right now the MtGox has exactly 105 708 BTC in the order book. Cashing out 100 000 USD however is a different story. It actually happened a few hours ago, you can see the impact for yourself[1]. [1] http://i.imgur.com/cjI9ZaT.png

A more sensible approach would be to take advantage of TradeHill's "dark pools" which enable very large BTC transactions to take place outside of the public order book.
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