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Krugman is wrong - Bitcoins not hoarded - Massive selloff

11 points by mrb 15y ago

sp332 15y ago
Yeah, I think Krugman tried to mix-n-match the dynamics of most (inflationary) currencies with BTC which are designed to be deflationary. The supply of BTC will drop off predictably. It's the predictability that makes a usable currency. For example, since everyone knows how the supply of BTC will change over time, people who are buying now can take the future value of BTC into consideration already.
Sam_Odio 15y ago
I'm not sure this proves Krugman is wrong. Sell-offs (especially large ones) don't indicate that hoarding hasn't taken place. In fact, if hoarding wasn't taking place I'd expect low variability in trading volume (since the currency would be used by a number of parties for small transactions). A large sell-off implies to me that a large amount of value has just transferred from one set of hoarders (investors?) to another. Either that, or someone just made a huge donation to WikiLeaks...
fhars 15y ago
A single large spike of stop-loss sales of a commoditiy that happens at the moment the commodity touches its previous three month low during a long downwards trend does not prove anything about the suitability of the commodity as a currency and is irrelevant to Krugman's argument. Without additional evidence that the exchanges are related to larger exchanges of bitcoin for goods and services, large sales on an exchange only show that would-be hoarders may be losing faith.
- mrb 15y ago
  It is not a single large sell. The graph I linked to shows that the massive sell-off has been going on for 4+ months at least. Look at the graph time axis.
Steko 15y ago
Whenever you think you're smarter then Krugman on economics take a step back, apply Occam's Razor and realize you're probably suffering from a cognitive bias. Krugman's simply making a bigger and simpler observation: costs of stuff in bitcoin over time haven't just been slightly deflationary over time, they've been massively deflationary such that there is no incentive to ever use it for actually buying things. This is sufficient to reject it as a currency on the first pass without looking at anything else. Maybe it will stabilize at some point and at that point can be evaluated on other merits.
- mrb 15y ago
  I know Krugman is more knowledgeable that me. I am simply suggesting he was not given the right data, or he did not look at recent trends, before judging Bitcoin. The system may be deflationary by nature, but people are sure not treating it as is. Or else you would not have seen the value drop from $32 to $4 in 4 months.
bsphil 15y ago
Look at the trade data, one person made a large selloff that triggered a cascade of automated responses. That, of course, could only happen if that person was hoarding BTC. Maybe he read that article and decided to cash out as a result.

11 points by mrb 15y ago

sp332 15y ago

Yeah, I think Krugman tried to mix-n-match the dynamics of most (inflationary) currencies with BTC which are designed to be deflationary. The supply of BTC will drop off predictably. It's the predictability that makes a usable currency. For example, since everyone knows how the supply of BTC will change over time, people who are buying now can take the future value of BTC into consideration already.

Sam_Odio 15y ago

I'm not sure this proves Krugman is wrong. Sell-offs (especially large ones) don't indicate that hoarding hasn't taken place. In fact, if hoarding wasn't taking place I'd expect low variability in trading volume (since the currency would be used by a number of parties for small transactions). A large sell-off implies to me that a large amount of value has just transferred from one set of hoarders (investors?) to another. Either that, or someone just made a huge donation to WikiLeaks...

fhars 15y ago

A single large spike of stop-loss sales of a commoditiy that happens at the moment the commodity touches its previous three month low during a long downwards trend does not prove anything about the suitability of the commodity as a currency and is irrelevant to Krugman's argument. Without additional evidence that the exchanges are related to larger exchanges of bitcoin for goods and services, large sales on an exchange only show that would-be hoarders may be losing faith.

mrb 15y ago
It is not a single large sell. The graph I linked to shows that the massive sell-off has been going on for 4+ months at least. Look at the graph time axis.

Steko 15y ago

Whenever you think you're smarter then Krugman on economics take a step back, apply Occam's Razor and realize you're probably suffering from a cognitive bias. Krugman's simply making a bigger and simpler observation: costs of stuff in bitcoin over time haven't just been slightly deflationary over time, they've been massively deflationary such that there is no incentive to ever use it for actually buying things. This is sufficient to reject it as a currency on the first pass without looking at anything else. Maybe it will stabilize at some point and at that point can be evaluated on other merits.

mrb 15y ago
I know Krugman is more knowledgeable that me. I am simply suggesting he was not given the right data, or he did not look at recent trends, before judging Bitcoin. The system may be deflationary by nature, but people are sure not treating it as is. Or else you would not have seen the value drop from $32 to $4 in 4 months.

bsphil 15y ago

Look at the trade data, one person made a large selloff that triggered a cascade of automated responses. That, of course, could only happen if that person was hoarding BTC. Maybe he read that article and decided to cash out as a result.