7 ms·

Eh? The volatility is a HUGE problem for bitcoin as a currency. If I run a small business, accepting payment in bitcoin just creates risk. The state of my bu

by derriz 9y ago

Eh? The volatility is a HUGE problem for bitcoin as a currency. If I run a small business, accepting payment in bitcoin just creates risk. The state of my business not only depends on the quality and success of my product/service but also on the volatility of bitcoin because by accepting bitcoin I am forced to effectively take a long position on BTC. The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem - struggling to pay wages and rent - even though my business is successful in that I made a profit on selling my products or services. The purchaser of my services is effectively on the other side of this trade and is exposed to the opposite risk wrt to BTC/USD. The only way for the two parties to minimize this risk would be for the customer to convert fiat currency into bitcoin just before paying, and then for the vendor to convert the bitcoin back immediately on receipt. With high spreads and transaction costs, using bitcoin in this manner is incredibly expensive and makes no business sense.

Bromlife 9y ago
Exactly. Until we pay rent, wages & stock with Bitcoin, it's essentially just digital gold bullion. You'd be an idiot to pay for any service with Bitcoin. A million dollar pizza makes for a great news story, but it would suck knowing that you effectively let go of millions of dollars just to buy a pizza. Bitcoin holders are disincentivized from spending it.
- ForHackernews 9y ago
  It's almost like being inherently deflationary is a negative property for a currency to have...but that can't be true, because lots of cryptobugs have explained to me at great length why this is actually Good For Bitcoin.
  - deleted 9y ago
    [deleted]
totalZero 9y ago
How does one take a short position in Bitcoin?
- 9935c101ab17a66 9y ago
  I think that's derriz's point. It's very difficult, and would be prohibitive for a small business to immediately convert bitcoin to cash.
  - juicyfroot 9y ago
    Bitcoin Cash
- hueving 9y ago
  Very soon (next week) bitcoin futures will start trading which will be an easy legitimate way to take a short position. You just need a futures account which you can get from regular financial institutions.
- malloryerik 9y ago
  If the futures markets at the CBOT or CME attract volume, you could use those. Otherwise, you'd have to do it over-the-counter. Borrow a bitcoin from someone and turn it into real money. When you have to repay, if BTC is down, you'll buy back a BTC at a profit. If it's up, you'll have to buy back at a loss. Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited. Of course the lender has to trust or be ensured (or insured) that you will repay. There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?
  - totalZero 9y ago
    http://www.cmegroup.com/trading/bitcoin-futures.html http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE. I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis. I wonder how hedging transactions will affect the mechanics of the bitcoin market.
Bromskloss 9y ago
> The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).
- salvar 9y ago
  Wouldn't that cost a huge amount in transaction fees, making the whole thing moot?
  - Bromskloss 9y ago
    For a large enough sales volume, the transaction fee might be negligible, but I don't know the numbers.
namelost 9y ago
The volatility of Bitcoin has been decreasing over time.
- librvf 9y ago
  It's still far too volatile to be a reasonable currency.
  - deleted 9y ago
    [deleted]
- _Tev 9y ago
  Recent price jumps tell a different story. Do you have any data to back it up?
  - jstanley 9y ago
    https://bitvol.info https://bitvol.info
nugget 9y ago
Do many Bitcoin boosters even care about BTC becoming a currency any more? Seems it has achieved much more success as a frenzied medium of global speculation than it ever dreamed of as a stable digital currency.
- alanfalcon 9y ago
  You underestimate the dreams of BTC Boosters.
- bad_user 9y ago
  If BTC isn't valuable as a currency, then it is in fact a speculative bubble that will suffer a dramatic collapse, just like the tulip mania in the Netherlands in the 17th century.
  - nugget 9y ago
    What about the new "digital gold" store of wealth narrative?
    - bad_user 9y ago
      Yes, but gold has been used as a currency for thousands of years and it does not share many of the problems of Bitcoin — for example it isn't so volatile. Of course, it's a finite resource and mining it involves dynamiting mountains and cyanide poisoning the environment, but then again Bitcoin mining currently consumes enormous amounts of energy and it can only grow from here. Also countries with no gold reserves have been at a disadvantage, but then Bitcoin mining will require enormous resources as well and countries without those resources will remain at a disadvantage. So personally I don't see any benefits whatsoever. If I had wealth to store, I'd invest in property simply because properties have intrinsic value. And yes, I'd still buy gold before Bitcoin or any other currency for storing wealth long term. Bitcoin is currently only useful for speculative gains and I don't see that changing.
    - saiya-jin 9y ago
      Digital gold term is utter nonsense and nothing more than wishful thinking of those involved. Gold has huge value, be it national reserves, jewelry, industries etc. and has never, ever lost much of its value. Bitcoin is a classical ponzi, you don't have more than few bytes of otherwise meaningless data, and only emotions are keeping the value so high. And as we know, emotions change. Don't insult gold. It will be around long after Bitcoin will become just another part of history.
infogulch 9y ago
If transactions were confirmed quickly with low fees, you could just turn around the Bitcoin in a few minutes in the exchange for dollars, all automatically. The price won't change that much on the timescale of minutes, so add in a small buffer percentage to make up the leftover difference and you're done.
- Double_a_92 9y ago
  That's where IOTA and/or Stellar Lumen come into play.

by derriz 9y ago

Bromlife 9y ago

Exactly. Until we pay rent, wages & stock with Bitcoin, it's essentially just digital gold bullion. You'd be an idiot to pay for any service with Bitcoin. A million dollar pizza makes for a great news story, but it would suck knowing that you effectively let go of millions of dollars just to buy a pizza. Bitcoin holders are disincentivized from spending it.

ForHackernews 9y ago
It's almost like being inherently deflationary is a negative property for a currency to have...but that can't be true, because lots of cryptobugs have explained to me at great length why this is actually Good For Bitcoin.
- deleted 9y ago
  [deleted]

totalZero 9y ago

How does one take a short position in Bitcoin?

9935c101ab17a66 9y ago
I think that's derriz's point. It's very difficult, and would be prohibitive for a small business to immediately convert bitcoin to cash.
- juicyfroot 9y ago
  Bitcoin Cash
hueving 9y ago
Very soon (next week) bitcoin futures will start trading which will be an easy legitimate way to take a short position. You just need a futures account which you can get from regular financial institutions.
malloryerik 9y ago
If the futures markets at the CBOT or CME attract volume, you could use those. Otherwise, you'd have to do it over-the-counter. Borrow a bitcoin from someone and turn it into real money. When you have to repay, if BTC is down, you'll buy back a BTC at a profit. If it's up, you'll have to buy back at a loss. Note that this gives you a maximum gain of whatever BTC/USD is today (assuming you denominate in greenbacks), while upside risk is theoretically unlimited. Of course the lender has to trust or be ensured (or insured) that you will repay. There must be people using Ethereum contracts to make options on BTC, and maybe trying to minimize counterparty risk through the judicious use of open-sourced smart contracts and digital collateral? Anyone know of interesting cases?
- totalZero 9y ago
  http://www.cmegroup.com/trading/bitcoin-futures.html http://www.cmegroup.com/trading/bitcoin-futures.html http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures http://cfe.cboe.com/cfe-products/xbt-cboe-bitcoin-futures Apparently they will list on 18 Dec on CME, and 10 Dec on CBOE. I get the feeling that there will be a fair bit of selling pressure as a result. That's usually the case on lockup expiries and it would make sense for the initiation of a volatile instrument that wasn't previously shortable on a listed basis. I wonder how hedging transactions will affect the mechanics of the bitcoin market.

Bromskloss 9y ago

> The price could crash by 25% before I sell the bitcoin and now I've a cash-flow problem Well, the parent comment said "if the transactions were quick", meaning that you would exchange the bitcoin for something else as soon as you received them (within a second or minute, say).

salvar 9y ago
Wouldn't that cost a huge amount in transaction fees, making the whole thing moot?
- Bromskloss 9y ago
  For a large enough sales volume, the transaction fee might be negligible, but I don't know the numbers.

namelost 9y ago

The volatility of Bitcoin has been decreasing over time.

librvf 9y ago
It's still far too volatile to be a reasonable currency.
- deleted 9y ago
  [deleted]
_Tev 9y ago
Recent price jumps tell a different story. Do you have any data to back it up?
- jstanley 9y ago
  https://bitvol.info https://bitvol.info

nugget 9y ago

Do many Bitcoin boosters even care about BTC becoming a currency any more? Seems it has achieved much more success as a frenzied medium of global speculation than it ever dreamed of as a stable digital currency.

alanfalcon 9y ago
You underestimate the dreams of BTC Boosters.
bad_user 9y ago
If BTC isn't valuable as a currency, then it is in fact a speculative bubble that will suffer a dramatic collapse, just like the tulip mania in the Netherlands in the 17th century.
- nugget 9y ago
  What about the new "digital gold" store of wealth narrative?
  - bad_user 9y ago
    Yes, but gold has been used as a currency for thousands of years and it does not share many of the problems of Bitcoin — for example it isn't so volatile. Of course, it's a finite resource and mining it involves dynamiting mountains and cyanide poisoning the environment, but then again Bitcoin mining currently consumes enormous amounts of energy and it can only grow from here. Also countries with no gold reserves have been at a disadvantage, but then Bitcoin mining will require enormous resources as well and countries without those resources will remain at a disadvantage. So personally I don't see any benefits whatsoever. If I had wealth to store, I'd invest in property simply because properties have intrinsic value. And yes, I'd still buy gold before Bitcoin or any other currency for storing wealth long term. Bitcoin is currently only useful for speculative gains and I don't see that changing.
  - saiya-jin 9y ago
    Digital gold term is utter nonsense and nothing more than wishful thinking of those involved. Gold has huge value, be it national reserves, jewelry, industries etc. and has never, ever lost much of its value. Bitcoin is a classical ponzi, you don't have more than few bytes of otherwise meaningless data, and only emotions are keeping the value so high. And as we know, emotions change. Don't insult gold. It will be around long after Bitcoin will become just another part of history.

infogulch 9y ago

If transactions were confirmed quickly with low fees, you could just turn around the Bitcoin in a few minutes in the exchange for dollars, all automatically. The price won't change that much on the timescale of minutes, so add in a small buffer percentage to make up the leftover difference and you're done.

Double_a_92 9y ago
That's where IOTA and/or Stellar Lumen come into play.