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There is something I don't understand about Bitcoin: right now there is a lot of instability in the exchange rate of Bitcoin and everyday currency like dollars,
by BitMastro 13y ago
There is something I don't understand about Bitcoin: right now there is a lot of instability in the exchange rate of Bitcoin and everyday currency like dollars, euros, or pounds, from the graph I checked from here[1].
How can it be a viable alternative, when its value can change by 40% in a month? Gaining or losing value is not important (if it's increasing value, I have to delay exchanging to dollars as much as possible thus withholding funds), but as long as a vast majority of the population is not using it to pay or get paid, it poses a serious problem to its adoption.
The only solutions I can think of are: either it becomes stable, and so everyday people can exchange other currencies in Bitcoin, or people get paid in Bitcoin by employers, so they can spend it whenever they want, but neither of them look like they're going to happen soon.
Am I wrong in my analysis? I'm not an expert in finance so maybe I might have missed something.
[1] http://bitcoincharts.com/charts/mtgoxEUR http://bitcoincharts.com/charts/mtgoxEUR
- derefr 13y agoJust don't keep BTC. I'm surprised the default method of using bitcoins isn't "I give send USD to my transfer agent, they make a BTC transfer to your transfer agent, and your transfer agent immediately deposits USD in your account", with the entire process occuring with a defined instantaneous exchange rate.
- BitMastro 13y agoThat's interesting! But isn't there any delay between currency exchange and an exchange fee as well?
- derefr 13y agoYes, I imagine that, like with Paypal, the sender would be responsible for eating both exchange fees. The delay, on the other hand, would impose price volatility that would likely be equal in both directions--so as long as the transfer-agents formed a network with an agreement that the receiving agent smoothed over both all losses and all gains during transfer, there should be net zero liability (they'd just need some float.)
- jtbigwoo 13y agoYou've lost me. Why would a consumer ever bother with BTC? Especially if both ends of the transaction are paying fees, spreads and paying for an escrow service. Also, does the merchant set your prices in BTC, and change prices a few times per week as the exchange rate fluctuates? Or are the prices in USD?
- derefr 13y agoWho said anything about an escrow service? One of the whole reasons to use BTC is irreversibility. You can build a crowdfunding site on atomic USD->BTC->USD transfers, precisely because there's no possibility of chargebacks. Crowdfunding is fundamentally a "pay cash in advance for some probability of a return" model, and BTC is the "cash" part that would make that work. Credit cards are very bad at being cash.
- michaelt 13y agoBefore my transfer agent will send the irreversible transfer of bitcoins, they'll want to receive their USD by some irreversible means. Why bother with the bitcoin sandwich? Why not transfer between the agents using Western Union or Hawala or whatever?
- jafaku 13y agoIt's a new currency that is not artificially stabilized by any government, so it's only natural that it has some wild fluctuations. If you don't like big gains just avoid holding BTC and you'll be fine.
- wmf 13y agoIt's not just that Bitcoin is not stabilized by any Government. Bitcoin has no stabilization mechanisms at all, and they cannot be added.
- M4v3R 13y agoAs derefr said, there are many third party processors who will handle the Bitcoin for you and wire you the cash directly as soon as you receive Bitcoin payment. Or you can do it yourself and sell your BTC as soon as you get them.