4 ms·

As more people start using bitcoins (specifically by mining them), by nature of the design of the network, bitcoins become more secure. When this happens, the

As more people start using bitcoins (specifically by mining them), by nature of the design of the network, bitcoins become more secure. When this happens, the currency becomes perceivably more stable for the future, which should raise the price of each unit of currency. it's not a speculative bubble in this regard. it's more of a reinforcing trend. I won't disagree that bitcoins are highly speculative at the moment-- but it is just important to note that along with speculation comes increased security.

jakewins 15y ago
What law of nature causes the BC to become more secure? We moved off the gold standard because it was too volatile, and we needed a way to stop rampant deflation and/or inflation (thus central banks expanding and contracting the money supply). That was the gold standard, where at least the underlying value was of worth outside of it's use as currency. In the BC universe, there is no system of regulating money supply, the underlying "value" is fictional, and AFAIK, thus there is no way to stop the deflation we're seeing already. I've also argued BC's inability to handle inflation, no separation between M0/M1 money leads to infinite lending and thus infinite inflation. Withoug a way to keep both of these under control, I really don't see how this system could end up stabilizing in a way that would be useful. Or am I missing something?
pemulis 15y ago
I don't think that that extra security is what we're seeing priced in the exchange, though. The traditional causes of volatility in commodities like gold and silver are increases in supply (new mines being discovered, new techniques developed, etc.) and people hedging en masse as they lose faith in the value of fiat currencies. (There are also speculative bubbles on occasion, as with anything else.) With bitcoins, we know where the supply will peak (21 million bitcoins) and the rate the supply will grow. Since the supply is predictable, it shouldn't lead to the volatility we can see in the market. The other cause for rapid deflation in commodities - people hedging because of a weak dollar (or whatever currency) - doesn't seem to be in play right now, either. The increase in security might account for an increase in value, but not 50%+ in one day. That sort of rapid deflation tells you that this is a bubble. We don't know what the stable value of a bitcoin is right now. It may be $100, it may be $1. But since nearly everyone using bitcoins right now are using them as investment instruments, we aren't seeing anything like a real price. Merchant and consumer adoption don't matter right now. All that matters is the market of other speculators. Watching the way the price shot up and down and up and down over the past 24 hours makes me think that a few people are manipulating the market and making a killing, and a lot of other people are getting scammed.

jakewins 15y ago

What law of nature causes the BC to become more secure? We moved off the gold standard because it was too volatile, and we needed a way to stop rampant deflation and/or inflation (thus central banks expanding and contracting the money supply). That was the gold standard, where at least the underlying value was of worth outside of it's use as currency. In the BC universe, there is no system of regulating money supply, the underlying "value" is fictional, and AFAIK, thus there is no way to stop the deflation we're seeing already. I've also argued BC's inability to handle inflation, no separation between M0/M1 money leads to infinite lending and thus infinite inflation. Withoug a way to keep both of these under control, I really don't see how this system could end up stabilizing in a way that would be useful. Or am I missing something?

pemulis 15y ago

I don't think that that extra security is what we're seeing priced in the exchange, though. The traditional causes of volatility in commodities like gold and silver are increases in supply (new mines being discovered, new techniques developed, etc.) and people hedging en masse as they lose faith in the value of fiat currencies. (There are also speculative bubbles on occasion, as with anything else.) With bitcoins, we know where the supply will peak (21 million bitcoins) and the rate the supply will grow. Since the supply is predictable, it shouldn't lead to the volatility we can see in the market. The other cause for rapid deflation in commodities - people hedging because of a weak dollar (or whatever currency) - doesn't seem to be in play right now, either. The increase in security might account for an increase in value, but not 50%+ in one day. That sort of rapid deflation tells you that this is a bubble. We don't know what the stable value of a bitcoin is right now. It may be $100, it may be $1. But since nearly everyone using bitcoins right now are using them as investment instruments, we aren't seeing anything like a real price. Merchant and consumer adoption don't matter right now. All that matters is the market of other speculators. Watching the way the price shot up and down and up and down over the past 24 hours makes me think that a few people are manipulating the market and making a killing, and a lot of other people are getting scammed.