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I think bitcoin is an extremely interesting concept, and the economics around it are equally interesting. I bought a tiny amount when the prices were around the

I think bitcoin is an extremely interesting concept, and the economics around it are equally interesting. I bought a tiny amount when the prices were around the $11 mark, and its insane to think of the price-shift. I made a couple bucks off the price shift, but now I'm honestly thinking that the price will fall back down. Despite serving the needs of many SR/SatoshiDice people, I dont think they're quite at the point of being honestly valued at $21 each. I think the fact that the price jump happened in (basically) a 12 hour period, coupled with the fact that bitcoin is traded as an investment very often makes me believe this is an artificial price jump. I'm no economics guru, but it just seems like common sense to me. Tons of people see a short burst and panic buy, this allows the sellers to ask consistently higher prices as many people panic buy (Lets face it, many, maybe the majority, including myself, in the bitcoin game, are amateurs when it comes to currency trading). Anyway, it'll be interesting to see where this goes, and I'll almost definetly be buying when/if the price falls to ~$12/$15, which really seems much more appropriate in my opinion.

Jd 14y ago
The problem with all fiat currencies is they have no inherent value; it is all in the eye of the beholder. So what is an "appropriate" price is quite difficult to determine. Most currencies are driven by being effective monopolies wherever they are issued, so the market price remains somewhat stable. Even so, many professional economists have opined that the exchange rates even between major currencies are way too volatile. This is, among other things, because there is a whole lot of loose money floating around that can easily jump between currencies. We are probably going to see a lot more of this in the Bitcoin world, which I expect has a lot more volatility ahead of it -- somewhat ironically in this case, as the increased liquidity promotes volatility, since it becomes an instrument of pure speculation that was previously too difficult for professional traders to deal in. In any case, I also had the intuition around the $11-12 mark that bitcoin was a good investment, since the major hurdles around the security issues were probably ironed out, but didn't invest anything -- probably because deep down I'm a value investor and don't see a lot of value in driving speculation in something that doesn't have inherent value (despite the many interesting technical aspects to Bitcoin).
- jswinghammer 14y ago
  Well Bitcoin is not a fiat currency since it being defined as money is not dictated by fiat. It isn't attached to a physical good which is interesting. I'm guessing that its' value is being helped by the increasing amount of inflation in fiat currencies around the world and that the newly created money doesn't have a better home. Many people are scared of stocks and real estate so other assets become more attractive. I'm not sure I have any use for Bitcoin in my life and in this financial environment I wouldn't be involved in Bitcoin at this or any price.
  - pixie_ 14y ago
    Exactly. People take note - Bitcoin is NOT fiat currency. Fiat is latin for 'let it be done.' As in governments can create new money at will. New bitcoins can't be created on demand by anyone.
    - nullc 14y ago
      You've misunderstood that defintion. Economically speaking fiat is a currency that exists by rulemaking instead of having an inherent value— it's constructed. The definition doesn't say who does the constructing or how. Bitcoin is a fiat currency— the fiat is embedded in the software that runs on and is enforced by all the Bitcoin nodes, it's the rules that make the currency exist and work. It's largely immutable, participated with by consent, transparent, and cryptographically strong in the way no government fiat is— bit it is technically a fiat currency. This is no big deal unless you make the Internet-liberitarian/goldbug mistake of thinking fiat is a dirty word.
      - pixie_ 14y ago
        Fiat does not imply constructed. The notion that gold (or tulips) are valuable are equally constructed ideas by humans. Nothing has 'inherent' value apart from the value humans perceive these things to have. No, the only thing fiat implies is manipulation - the ability for a government or person to mess with the value of a currency by 'willing it to be.' Bitcoin is not fiat.
deleted 14y ago
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eitland 14y ago
The fact that there are fewer possible bitcoins than inhabitants on this planet should tell us that bitcoin should be a good investment at the current excange rate... ...given that bitcoin is still around when all blocks are exhausted, legal to most of the worlds population by then and not outcompeted by something better (better marketed?) by then. Warning: I am no economist, I still don't know what a fiat currency is although I might have an idea after reading this thread.
- deleted 14y ago
  [deleted]
  - eitland 14y ago
    Exactly my point. Fractions of a bitcoin will become normal amounts in everyday purchases because since there is not even enough bitcoins for everyone the value of each coin will rise.
- betterunix 14y ago
  "I still don't know what a fiat currency is although I might have an idea after reading this thread." Fiat currencies are currencies whose demand is created by a legal system. The US Dollar, for example, has demand that is created by law: tax laws, bankruptcy laws, etc. Like anything else, the value of money is determined by supply and demand.
mrb 14y ago
The price jumped from $13 to $22 over 1 month, not 12 hours. http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g25 http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g2...
- unix-dude 14y ago
  Youre actually right. It jumped from around 15.50 to a bit above 20 in one day. The point stands though, very short term, massive spikes.
  - nextstep 14y ago
    On what day? Can you link to a graph showing this? I see a more steady progression from 13-15 to 21 over the last 30 days.
  - mrb 14y ago
    You misremember. On Jan 23-24, there is a 36 hour period where it jumped from $16.8 to $19.2. http://bitcoincharts.com/charts/mtgoxUSD#rg30zczsg2013-01-24zeg2013-01-25ztgSzm1g10zm2g25zv http://bitcoincharts.com/charts/mtgoxUSD#rg30zczsg2013-01-24... That's the closest scenario I can find. Certaintly not "$15.5 to $20+ in 12 hours".

Jd 14y ago

The problem with all fiat currencies is they have no inherent value; it is all in the eye of the beholder. So what is an "appropriate" price is quite difficult to determine. Most currencies are driven by being effective monopolies wherever they are issued, so the market price remains somewhat stable. Even so, many professional economists have opined that the exchange rates even between major currencies are way too volatile. This is, among other things, because there is a whole lot of loose money floating around that can easily jump between currencies. We are probably going to see a lot more of this in the Bitcoin world, which I expect has a lot more volatility ahead of it -- somewhat ironically in this case, as the increased liquidity promotes volatility, since it becomes an instrument of pure speculation that was previously too difficult for professional traders to deal in. In any case, I also had the intuition around the $11-12 mark that bitcoin was a good investment, since the major hurdles around the security issues were probably ironed out, but didn't invest anything -- probably because deep down I'm a value investor and don't see a lot of value in driving speculation in something that doesn't have inherent value (despite the many interesting technical aspects to Bitcoin).

jswinghammer 14y ago
Well Bitcoin is not a fiat currency since it being defined as money is not dictated by fiat. It isn't attached to a physical good which is interesting. I'm guessing that its' value is being helped by the increasing amount of inflation in fiat currencies around the world and that the newly created money doesn't have a better home. Many people are scared of stocks and real estate so other assets become more attractive. I'm not sure I have any use for Bitcoin in my life and in this financial environment I wouldn't be involved in Bitcoin at this or any price.
- pixie_ 14y ago
  Exactly. People take note - Bitcoin is NOT fiat currency. Fiat is latin for 'let it be done.' As in governments can create new money at will. New bitcoins can't be created on demand by anyone.
  - nullc 14y ago
    You've misunderstood that defintion. Economically speaking fiat is a currency that exists by rulemaking instead of having an inherent value— it's constructed. The definition doesn't say who does the constructing or how. Bitcoin is a fiat currency— the fiat is embedded in the software that runs on and is enforced by all the Bitcoin nodes, it's the rules that make the currency exist and work. It's largely immutable, participated with by consent, transparent, and cryptographically strong in the way no government fiat is— bit it is technically a fiat currency. This is no big deal unless you make the Internet-liberitarian/goldbug mistake of thinking fiat is a dirty word.
    - pixie_ 14y ago
      Fiat does not imply constructed. The notion that gold (or tulips) are valuable are equally constructed ideas by humans. Nothing has 'inherent' value apart from the value humans perceive these things to have. No, the only thing fiat implies is manipulation - the ability for a government or person to mess with the value of a currency by 'willing it to be.' Bitcoin is not fiat.

deleted 14y ago

[deleted]

eitland 14y ago

The fact that there are fewer possible bitcoins than inhabitants on this planet should tell us that bitcoin should be a good investment at the current excange rate... ...given that bitcoin is still around when all blocks are exhausted, legal to most of the worlds population by then and not outcompeted by something better (better marketed?) by then. Warning: I am no economist, I still don't know what a fiat currency is although I might have an idea after reading this thread.

deleted 14y ago
[deleted]
- eitland 14y ago
  Exactly my point. Fractions of a bitcoin will become normal amounts in everyday purchases because since there is not even enough bitcoins for everyone the value of each coin will rise.
betterunix 14y ago
"I still don't know what a fiat currency is although I might have an idea after reading this thread." Fiat currencies are currencies whose demand is created by a legal system. The US Dollar, for example, has demand that is created by law: tax laws, bankruptcy laws, etc. Like anything else, the value of money is determined by supply and demand.

mrb 14y ago

The price jumped from $13 to $22 over 1 month, not 12 hours. http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g25 http://bitcoincharts.com/charts/mtgoxUSD#rg60ztgSzm1g10zm2g2...

unix-dude 14y ago
Youre actually right. It jumped from around 15.50 to a bit above 20 in one day. The point stands though, very short term, massive spikes.
- nextstep 14y ago
  On what day? Can you link to a graph showing this? I see a more steady progression from 13-15 to 21 over the last 30 days.
- mrb 14y ago
  You misremember. On Jan 23-24, there is a 36 hour period where it jumped from $16.8 to $19.2. http://bitcoincharts.com/charts/mtgoxUSD#rg30zczsg2013-01-24zeg2013-01-25ztgSzm1g10zm2g25zv http://bitcoincharts.com/charts/mtgoxUSD#rg30zczsg2013-01-24... That's the closest scenario I can find. Certaintly not "$15.5 to $20+ in 12 hours".