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Bitcoin exchange rate reached $100 USD per BTC

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Re: Bitcoin exchange rate reached $100 USD per BTC

#531

Post by lenazegher »

rmc wrote: post #389
randallsquared wrote: post #232

Earlier quoted context omitted.

> The reason it's bad is that deflation makes it more profitable to do nothing than to invest. This makes no sense to me. If keeping 100 units makes one richer because they are worth more in a year, then any investment which has a positive return (that is, you end up with more than 100 units in a year) must be that much better... What am I missing?

Let's pretend the deflation is at 3% (i.e. there's a inflation rate of -3%). Then your 100 units will be worth 103 units (in today's money) in 1 years time. This is a guaranteed rate of deflation (bitcoin has a guaranteed rate of deflation, I don't know if it's 3%) So someone comes along and wants a loan, but they can't pay back 3% interest rate, only 2%. Why would you give that person your 100 units if you'll only g…

>So someone comes along and can pay you 5% interest rate. Sounds better, right? However it's for a business. So you don't know if their business will survive, it might go backrupt. Let's pretend it's an early start up, so there's a 50/50 chance they go bust and your 100 units are a write off and gone.

I know it's just an example, but no-one should ever lend at 5% if there's a 50% chance of losing the total sum, regardless of the currency involved and whether it's deflationary or inflationary. The EV of such a loan is -$47.50 for a one-year term.

>So someone comes along and wants a loan, but they can't pay back 3% interest rate, only 2%. Why would you give that person your 100 units if you'll only get 102 units (in today's money) back in a year? Much better to hold on to it.

Because if you don't lend, you keep your $100. If you lend, you get back $103. $103 will always be worth more than $100, regardless of whether your currency is inflationary or deflationary.

Re: Bitcoin exchange rate reached $100 USD per BTC

#532

Post by phaemon »

AnIrishDuck wrote: post #312
walkon wrote: post #250

Earlier quoted context omitted.

> The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. If this is holds true, why do people buy from markets where prices regularly decrease? Wouldn't it follow that they will wait in perpetuity and never buy that new phone/laptop/etc?

> Wouldn't it follow that they will wait in perpetuity and never buy that new phone/laptop/etc? People derive utility from those things. They make calls with their phone and do work on their laptop. Bitcoin is entirely different. It's only purpose is to allow you to buy other stuff.

In the example of buying a laptop, the laptop is not the deflationary thing. The deflationary thing is the one that increases in value, not decreases. Dollars (or whatever) are the deflationary thing in that example. They increase in value compared to the laptop (you get more laptop for the same number of dollars).

Therefore when you compare Bitcoins to the laptop, you're comparing the wrong things. The argument is:

"People will not spend deflationary currency [Bitcoin] on stuff [anything] because it's better to simply keep the deflationary currency [Bitcoin]"

the reply is:

"People do spend deflationary currency [Dollars] on stuff [laptops] even though it would be better to simply keep the deflationary currency [Dollars]"

Dollars are deflationary relative to laptops.

Re: Bitcoin exchange rate reached $100 USD per BTC

#533

Post by sergiosgc »

randallsquared wrote: post #232
deelowe wrote: post #218

Earlier quoted context omitted.

There are a few replies here that seem to be reacting negatively to the OP due to the tone of the submission instead of the content. To be clear, deflation is categorically bad for a currency. It's terrible, like great depression terrible. The reason it's bad is that deflation makes it more profitable to do nothing than to invest. When this happens, people react by not spending money. The market dies. While inflation…

> The reason it's bad is that deflation makes it more profitable to do nothing than to invest. This makes no sense to me. If keeping 100 units makes one richer because they are worth more in a year, then any investment which has a positive return (that is, you end up with more than 100 units in a year) must be that much better... What am I missing?

It increases the return on investment needed for a project to succeed. Simple example: I grab the 100btc and buy machinery to support my new factory. Right after buying, I'm losing money, because machinery won't appreciate like BTC does. So, I'm only interested I machinery investments that return over the BTC deflation rate.

This is a simple example. Some of this already occurs in the real world, since machinery depreciates over time. it's just that currency deflation is another force opposing investment and braking money flow.

Re: Bitcoin exchange rate reached $100 USD per BTC

#534

Post by cjg »

wmf wrote: post #255
dm2 wrote: post #207

Earlier quoted context omitted.

Supposedly they can easily change algorithms if SHA-256 is broken in the future. Here is a list of client security issues: https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposu... It seems like the biggest risk would be with the wallet websites, which is an issue that is present in other payment methods. The biggest problem IMO is that there is no way to refund or right the wrongs done by an attack. If someone…

I think betterunix is not talking about a crypto flaw but a 51% attack; for ~$20M you can buy enough ASICs to basically take control of Bitcoin. (I'm not convinced that mathematical concepts like "polynomial time" should be applied without consideration for economics, but that's a whole different topic.)

Which provides an interesting way to value BTC. If the total value goes much over the cost of a 51% attack then it is overvalued.

Re: Bitcoin exchange rate reached $100 USD per BTC

#535

Post by rumcajz »

lolcraft wrote: post #176

Some people here seem to think that this is temporary, that sometime in the future Bitcoin will stabilize into a glorious future global currency -- never mind the new class of cryptobarons it will have created from its inner circle, through shameless hoarding. My question is, what then will happen when Bitcoin stabilizes, that is, when the time to new coin mined approaches practically infinity? Let's assume the globa…

One thing to consider: In 30-50 years the world population starts shrinking, however, amount of bitcoins will stay the same. Which in turn is likely to inflate it's value and possibly offset the deflation.

Re: Bitcoin exchange rate reached $100 USD per BTC

#537

Post by iSnow »

bitcartel wrote: post #413
dragontamer wrote: post #375

Earlier quoted context omitted.

Did you read your articles? Germans are bringing gold back into their own country, as opposed to holding it in other exchanges. They have neither increased nor decreased their supply. China and India are world-class consumers of gold for jewelry, as expected of the world's most populous countries with a rising middle class. Gold is also used in microelectronic components. Chinese Banks on the other hand, have not inc…

Er, yes, I can read: Why are Germany repatriating their gold? Why do they want it in their own hands? Why go through all that trouble instead of just selling? Why would they want to keep holding onto a "piss poor investment"? Regarding China, the article's author believes that China has been accumulating gold. The last known official figure is from 2009 and since then imports continue to rise, which in the authors op…

>Why are Germany repatriating their gold? Why do they want it in their own hands?

Kraut here. Quite easy to explain, really.

The tabloids and some politicians made up a story along the lines that none of our politicians or central bankers has ever had access to the gold stash in the US and that probably this stash no longer exists.

So as to calm down people, the German central bank has declared they will repatriate 700 tons of gold (out of ~2000t stored in the US, UK, and France).

Re: Bitcoin exchange rate reached $100 USD per BTC

#538

Post by narcissus »

wmf wrote: post #255
dm2 wrote: post #207

Earlier quoted context omitted.

Supposedly they can easily change algorithms if SHA-256 is broken in the future. Here is a list of client security issues: https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposu... It seems like the biggest risk would be with the wallet websites, which is an issue that is present in other payment methods. The biggest problem IMO is that there is no way to refund or right the wrongs done by an attack. If someone…

I think betterunix is not talking about a crypto flaw but a 51% attack; for ~$20M you can buy enough ASICs to basically take control of Bitcoin. (I'm not convinced that mathematical concepts like "polynomial time" should be applied without consideration for economics, but that's a whole different topic.)

I'll just hope that if someone decides to go down that route, then at least one other person does too :)

Re: Bitcoin exchange rate reached $100 USD per BTC

#539

Post by knowaveragejoe »

mrb wrote: post #419
knowaveragejoe wrote: post #38

Earlier quoted context omitted.

That is my sentiment exactly. There is much talk of growing bitcoin adoption, but I've yet to see anything beyond a few web-based services(which, beyond their time, are almost free for the operators to begin with).

"A few web-based services" ?? Here is a list of more than a thousand merchants accepting Bitcoin: https://en.bitcoin.it/wiki/Trade And there are a lot more not on this list. Bitpay alone (a Bitcoin payment processor) claims to have multiple thousands of merchants.

Yes, I've seen it. Have you given it a serious look? It looks great in quantity, but would you ever consider purchasing anything for a decent sum from any of them? The only remotely reputable merchant I'm aware of on there is BitcoinStore.

Furthermore, there is noone offering general groceries, household supplies or clothing, just niche approximations of those categories. Also critically lacking are complex B2B services(their professional services section is...well, not much to look at - I certainly would not be investing my business's money in any of them at this time).

Re: Bitcoin exchange rate reached $100 USD per BTC

#540

Post by chii »

polarix wrote: post #241
tvladeck wrote: post #236

Currencies have existed in a huge variety of forms over time. Basically anything can work as a medium of exchange as long as everyone has a high degree of confidence that if they are paid in the currency, that they too can pay someone else in that currency. But that's not to say all currency regimes are created equally -- we've learned a number of lessons, painfully, about how to manage currencies. For a small-scale,…

It's close to a new gold standard. The one problem associated with gold that it does solve is being as good a medium of exchange as visa/paypal (or better).

The one thing BTC cannot yet replicate is the trust that gold standard has.

Anyone in the world would immediately accept gold standard, but this BTC, despite being a digital gold, will be difficult to overcome the initial fear/mist-trust. It doesn't matter what mathematical proof you provide - the laymen doesn't really understand it. May be one day, it becomes accepted, and BTC will then really be a new gold standard. But i don't see that day coming, because there are people who don't like the gold standard (as it prevents them from leeching money from society - i.e., various parties/entities who hold controlling interests in major central banks etc).

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