11 ms·

In one post you're predicting/hyping $5-$10 BTC/USD and in another you're discussing what should happen to encourage commerce? Is it a case of you not realizing

by trotsky 15y ago

In one post you're predicting/hyping $5-$10 BTC/USD and in another you're discussing what should happen to encourage commerce? Is it a case of you not realizing how diametrically opposed those two goals are, or simply one where you assume readers won't note the contradiction?

mike_esspe 15y ago
I don't see the contradiction. Let's say you are selling some good, 95% of which you are buying with USD, 5% is your profit. When someone purchase this good from you in bitcoins, you need to instantly convert 95% of the cost to USD. For this to happen you need to have a liquid exchange. And because the number of bitcoins is limited, and the number of traders are going up, we see a steep increase of exchange rate.
- trotsky 15y ago
  Well, what you're describing is merely a difficult to use stand-in for the USD with fees on both ends. Reasons you need stable value in a currency for it to be good for commerce: Pricing hell: If you're a merchant you probably need to be changing your prices in BTC several times a day at this point. In such a thin market, what trades do you believe for quoted value? No buyers: People holding a currency that is deflating are unlikely to buy - why spend your money now when it could be worth twice as much in two weeks? Those alpaca socks won't be worth twice as much. Inability to hedge: With no instruments available to hedge BTC trades a merchant's exposure to wild currency swings is almost infinite. Thin markets + no safety in holding BTC means that merchants who feel the need to setlle out of BTC several times a day or after every transaction will 100% be at the mercy of the markets. Last trade was 1.37 LRUSD/BTC - what you based your sale price on? Sorry, our buyers have thinned, if you want to settle 150BTC you're going to have to take an average of 1.10 LRUSD/BTC. I could go on of course. But you'd do yourself better by picking up an econ 101 textbook.
  - mike_esspe 15y ago
    I don't see another way to bootstrap a new currency. BTW currently the whole bitcoin economy is 1/30 the size of e-gold reserves in 2007. So to be at least like e-gold it has to rise 30 times current price. If people hold the currency to get twice next week, than this logic apply to dollars too. Why spend dollars today, if you can convert them to bitcoins and spend twice the amount next week? Either this logic works both for bitcoins and dollars, or don't work at all. You can hedge BTC value on exchange instantly via exchanges API, i think i explained that in the previous post. That is the reason we need a high volume exchanges (currently mtgox have around $10000-$50000 volume per day). Merchants do it automatically, not by hand. I think we'll see a bitcoin billing soon, that will help to do this without programming knowledge. Of course there are a lot of difficulties now, but how will you explain, that amount of traders is rising despite all this difficulties? Compare this page https://en.bitcoin.it/wiki/Trade https://en.bitcoin.it/wiki/Trade from the February and now.
omouse 15y ago
There's no contradiction. The prices in BTC for services/goods are lowered until people want to pay. With speculation, the trick is that eventually the currency has to land in the pockets of someone who will trade it for services/goods. If no one wants to do that, you basically have an infinite loop for currency speculation going on and eventually there's no point in grabbing the currency when no one wants to give it up unless it's for USD.

by trotsky 15y ago

mike_esspe 15y ago

I don't see the contradiction. Let's say you are selling some good, 95% of which you are buying with USD, 5% is your profit. When someone purchase this good from you in bitcoins, you need to instantly convert 95% of the cost to USD. For this to happen you need to have a liquid exchange. And because the number of bitcoins is limited, and the number of traders are going up, we see a steep increase of exchange rate.

trotsky 15y ago
Well, what you're describing is merely a difficult to use stand-in for the USD with fees on both ends. Reasons you need stable value in a currency for it to be good for commerce: Pricing hell: If you're a merchant you probably need to be changing your prices in BTC several times a day at this point. In such a thin market, what trades do you believe for quoted value? No buyers: People holding a currency that is deflating are unlikely to buy - why spend your money now when it could be worth twice as much in two weeks? Those alpaca socks won't be worth twice as much. Inability to hedge: With no instruments available to hedge BTC trades a merchant's exposure to wild currency swings is almost infinite. Thin markets + no safety in holding BTC means that merchants who feel the need to setlle out of BTC several times a day or after every transaction will 100% be at the mercy of the markets. Last trade was 1.37 LRUSD/BTC - what you based your sale price on? Sorry, our buyers have thinned, if you want to settle 150BTC you're going to have to take an average of 1.10 LRUSD/BTC. I could go on of course. But you'd do yourself better by picking up an econ 101 textbook.
- mike_esspe 15y ago
  I don't see another way to bootstrap a new currency. BTW currently the whole bitcoin economy is 1/30 the size of e-gold reserves in 2007. So to be at least like e-gold it has to rise 30 times current price. If people hold the currency to get twice next week, than this logic apply to dollars too. Why spend dollars today, if you can convert them to bitcoins and spend twice the amount next week? Either this logic works both for bitcoins and dollars, or don't work at all. You can hedge BTC value on exchange instantly via exchanges API, i think i explained that in the previous post. That is the reason we need a high volume exchanges (currently mtgox have around $10000-$50000 volume per day). Merchants do it automatically, not by hand. I think we'll see a bitcoin billing soon, that will help to do this without programming knowledge. Of course there are a lot of difficulties now, but how will you explain, that amount of traders is rising despite all this difficulties? Compare this page https://en.bitcoin.it/wiki/Trade https://en.bitcoin.it/wiki/Trade from the February and now.

omouse 15y ago

There's no contradiction. The prices in BTC for services/goods are lowered until people want to pay. With speculation, the trick is that eventually the currency has to land in the pockets of someone who will trade it for services/goods. If no one wants to do that, you basically have an infinite loop for currency speculation going on and eventually there's no point in grabbing the currency when no one wants to give it up unless it's for USD.