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> While the value is fluctuating heavily due to speculation, over time it will stabilize. Can you describe any mechanism that actually causes the price to stab

> While the value is fluctuating heavily due to speculation, over time it will stabilize. Can you describe any mechanism that actually causes the price to stabilize and speculation to disappear? (Please, if possible, also define at least somewhat quantitatively what you mean by stable, and then discuss how successful this mechanism you first described has been stabilizing gold price during the last couple of thousand years when gold has been used as moneylike instrument and store of value.)

coralreef 8y ago
Quantity of demand is equal to quantity supplied
- beefield 8y ago
  And what makes them equal? Wishful thinking does not count. I know no law of nature nor economics that says that demand of money is stable. And if you allow fractional reserve bitcoin banking without regulation[1], money supply would be completely chaotic. [1] I guess the question is how would you prohibit fractional reserve bitcoin banking? It's not like there exists any regulatory authority that could do that...
  - coralreef 8y ago
    Not sure what you mean by "what makes them equal". It is a supply and demand curve. Where they meet is the equilibrium. https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand Fractional reserve banking doesn't work with Bitcoin, unless you somehow trust a centralized party to always honor your withdrawal, or the coins never leave that internal system. Many exchanges could theoretically be running fractional reserve operations. But they are just risking themselves because once a rumour gets out, a bank run will occur and they will be exposed. Once you withdraw your coins from this trusted system, it is accounted for on the blockchain.
    - boomlinde 8y ago
      > Where they meet is the equilibrium. You're not answering the question, just tautologically rephrasing it.
    - strypey 8y ago
      > It is a supply and demand curve. Where they meet is the equilibrium. Academic economists like Steve Keen have totally demolished the classic supply/demand curve: https://unlearningeconomics.wordpress.com/2012/06/25/debunking-economics-part-i-demand-curves-can-have-any-shape/ https://unlearningeconomics.wordpress.com/2012/06/25/debunki... Here's a suitably scornful graphical version: https://www.youtube.com/watch?v=Y3wUqcapSU4 https://www.youtube.com/watch?v=Y3wUqcapSU4

coralreef 8y ago

Quantity of demand is equal to quantity supplied

beefield 8y ago
And what makes them equal? Wishful thinking does not count. I know no law of nature nor economics that says that demand of money is stable. And if you allow fractional reserve bitcoin banking without regulation[1], money supply would be completely chaotic. [1] I guess the question is how would you prohibit fractional reserve bitcoin banking? It's not like there exists any regulatory authority that could do that...
- coralreef 8y ago
  Not sure what you mean by "what makes them equal". It is a supply and demand curve. Where they meet is the equilibrium. https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand Fractional reserve banking doesn't work with Bitcoin, unless you somehow trust a centralized party to always honor your withdrawal, or the coins never leave that internal system. Many exchanges could theoretically be running fractional reserve operations. But they are just risking themselves because once a rumour gets out, a bank run will occur and they will be exposed. Once you withdraw your coins from this trusted system, it is accounted for on the blockchain.
  - boomlinde 8y ago
    > Where they meet is the equilibrium. You're not answering the question, just tautologically rephrasing it.
  - strypey 8y ago
    > It is a supply and demand curve. Where they meet is the equilibrium. Academic economists like Steve Keen have totally demolished the classic supply/demand curve: https://unlearningeconomics.wordpress.com/2012/06/25/debunking-economics-part-i-demand-curves-can-have-any-shape/ https://unlearningeconomics.wordpress.com/2012/06/25/debunki... Here's a suitably scornful graphical version: https://www.youtube.com/watch?v=Y3wUqcapSU4 https://www.youtube.com/watch?v=Y3wUqcapSU4