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You have it backwards. If I spend $1M doing some awesome product and will ask for it $1.1M to cover my costs and make some profit, then it says nothing about ho

You have it backwards. If I spend $1M doing some awesome product and will ask for it $1.1M to cover my costs and make some profit, then it says nothing about how many people would actually pay that price. Miners invest in mining in expectation of price rise. They could equally go to exchange and buy bitcoins in expectation of higher price in the future. Whether they are correct or not will be decided not by them, but by all other people who demand bitcoins and bid up the prices. If there is no new demand for bitcoins, price will not grow because there won't be competition for buying them.

saalweachter 13y ago
Bitcoin is a little bit weird because it is a currency which (essentially) nothing is priced in. So actual users of bitcoin-the-currency don't really care what the price of a bitcoin is, as long as it is stable enough for them to complete a transaction. They don't need to buy 1 or 0.1 or 10 bitcoins, they need to buy exactly $100 or $10 or $1000 of bitcoins to complete their transaction, and the actual price per bitcoin doesn't matter.
- oleganza 13y ago
  You are right that exact price of Bitcoin is irrelevant when you need to convert 8 hours of your day job into an iPhone. But for anything to be a medium of exchange it must have value. And the value is derived solely from the desire to hold Bitcoins vs. holding dollars, euros, oil, gold, consumption goods etc. The more people on the market want to hold Bitcoins, the more liquid it is (regardless of the price). But since the amount of Bitcoins is fixed, increasing liquidity would always have to come with a growing price. Simply because for every new person to come in and buy a Bitcoin, he need to outbid all other people like him, and also outbid time preference of the existing holders. In other words, growing price of a good in a fixed supply sends a signal of its bigger liquidity. Meaning it's even better medium of exchange for you to accept (even if you don't invest in it yourself). Things don't need to be priced in Bitcoin for it to have value and to be used in exchange with this value. Things will be priced in the most stable, most liquid commodity and today it is fiat currency. Bitcoin needs to be spread to many more hands than it is today. This is what happens today and we are still at less than 0.1% of global population that is even aware that this technology exists.
  - saalweachter 13y ago
    I will say that BTC has risen another ~10% since the discussion started, in the lead up to what had been predicted as a 11% difficulty increase (now predicted at 15%), which looks bad for my hypothesis.

saalweachter 13y ago

Bitcoin is a little bit weird because it is a currency which (essentially) nothing is priced in. So actual users of bitcoin-the-currency don't really care what the price of a bitcoin is, as long as it is stable enough for them to complete a transaction. They don't need to buy 1 or 0.1 or 10 bitcoins, they need to buy exactly $100 or $10 or $1000 of bitcoins to complete their transaction, and the actual price per bitcoin doesn't matter.

oleganza 13y ago
You are right that exact price of Bitcoin is irrelevant when you need to convert 8 hours of your day job into an iPhone. But for anything to be a medium of exchange it must have value. And the value is derived solely from the desire to hold Bitcoins vs. holding dollars, euros, oil, gold, consumption goods etc. The more people on the market want to hold Bitcoins, the more liquid it is (regardless of the price). But since the amount of Bitcoins is fixed, increasing liquidity would always have to come with a growing price. Simply because for every new person to come in and buy a Bitcoin, he need to outbid all other people like him, and also outbid time preference of the existing holders. In other words, growing price of a good in a fixed supply sends a signal of its bigger liquidity. Meaning it's even better medium of exchange for you to accept (even if you don't invest in it yourself). Things don't need to be priced in Bitcoin for it to have value and to be used in exchange with this value. Things will be priced in the most stable, most liquid commodity and today it is fiat currency. Bitcoin needs to be spread to many more hands than it is today. This is what happens today and we are still at less than 0.1% of global population that is even aware that this technology exists.
- saalweachter 13y ago
  I will say that BTC has risen another ~10% since the discussion started, in the lead up to what had been predicted as a 11% difficulty increase (now predicted at 15%), which looks bad for my hypothesis.