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News flash: A transaction requires a buyer and a seller. If you bought Bitcoin, someone else sold Bitcoin.

by jafaku 13y ago

JumpCrisscross 13y ago
There is no balanced ledger - Bitcoins can be spun into existence through mining, i.e. without the transfer of hard currency.
- oleganza 13y ago
  Mining is strictly planned, everyone knows how much and when will be produced. New bitcoins are already accounted for in the price.
tedunangst 13y ago
That doesn't account for an imbalance in the number of potential buyers and sellers. It's very easy to buy a house for $100 million. Go to your real estate agent and say "Here's a $100 million. Buy me a house." It is, however, considerably harder to sell a house for $100 million.
- gjm11 13y ago
  I'm not convinced. It's only easy to buy a house for $100M if you have $100M you can spare for house-buying. And then you only get to choose from the rather limited range of $100M houses that are available for sale. Similarly, you only get to sell a house for $100M if you have a house that nice to sell. And then you only get to sell to the rather limited range of people willing to buy a house for $100M. But perhaps I've misunderstood. If you happen to have $100M burning a hole in your pocket, it's easy to buy a house that would normally cost $1M with it, because most people with $1M houses will happily sell them for $100M. But the parallel to that is that if you happen to have a house that would normally cost $100M, it's easy to sell it for $1M. Which it would be.
  - crististm 13y ago
    The point is the liquidity of houses is less than liquidity of cash. Likewise, the liquidity of bitcoins is less than liquidity of dollars. You can easily buy bitcoins(houses) if you have the money, but the reverse is not true.
    - gibybo 13y ago
      How is this true? Everywhere you can buy Bitcoins will let you sell them with roughly the same effort involved (except MtGox perhaps).
    - jnbiche 13y ago
      >You can easily buy bitcoins(houses) if you have the money, but the reverse is not true. With the exception of Mt. Gox, this is simply not true. It's hard to both buy and sell Bitcoins if you've not been verified at an exchange, but once you do that (not very hard), it's equally easy to both buy and sell. The only delay is the time needed for the wire or ACH to arrive. I get the feeling that many of you are talking confidently about something you have no experience with. Where are you getting the idea that it's hard to sell Bitcoins?
- kazagistar 13y ago
  What do you think determines the price? If you can't sell a bitcoin, you lower the price til you can sell it. If you can't buy a bitcoin, you raise how much you will pay until you can buy one. The only reasons it is different with houses is because people are emotionally invested in them, not all houses are equivalent (and thus their value is unique per house), and liquidity is hence really low, and market prices adjust slowly. Bitcoins are worth a thousand dollars because people who own them are not willing to part with them for less, and people who are buying them are willing to pay that much. This is economics 101. You can always cash out at the market price, unless liquidity is low; the only time that happens is in a teeny market or a crash.
  - notdrunkatall 13y ago
    So profound a concept, yet so simple, and often at the root of so much fallacious thinking. Thanks for taking the time to educate our economically challenged friends.
- jafaku 13y ago
  Is the market price of houses $100 million though? No? That's what I thought.
patmcc 13y ago
Yes, but did they cash out into real currency? There are lots of "US dollars" on MtGox sitting in the accounts of people who sold bitcoins. It's clear someone has the US dollars; it's not clear it's in the hands of the sellers (or ever will be).

News flash: A transaction requires a buyer and a seller. If you bought Bitcoin, someone else sold Bitcoin.

by jafaku 13y ago

News flash: A transaction requires a buyer and a seller. If you bought Bitcoin, someone else sold Bitcoin.

There is no balanced ledger - Bitcoins can be spun into existence through mining, i.e. without the transfer of hard currency.

oleganza 13y ago
Mining is strictly planned, everyone knows how much and when will be produced. New bitcoins are already accounted for in the price.

tedunangst 13y ago

That doesn't account for an imbalance in the number of potential buyers and sellers. It's very easy to buy a house for $100 million. Go to your real estate agent and say "Here's a $100 million. Buy me a house." It is, however, considerably harder to sell a house for $100 million.

gjm11 13y ago
I'm not convinced. It's only easy to buy a house for $100M if you have $100M you can spare for house-buying. And then you only get to choose from the rather limited range of $100M houses that are available for sale. Similarly, you only get to sell a house for $100M if you have a house that nice to sell. And then you only get to sell to the rather limited range of people willing to buy a house for $100M. But perhaps I've misunderstood. If you happen to have $100M burning a hole in your pocket, it's easy to buy a house that would normally cost $1M with it, because most people with $1M houses will happily sell them for $100M. But the parallel to that is that if you happen to have a house that would normally cost $100M, it's easy to sell it for $1M. Which it would be.
- crististm 13y ago
  The point is the liquidity of houses is less than liquidity of cash. Likewise, the liquidity of bitcoins is less than liquidity of dollars. You can easily buy bitcoins(houses) if you have the money, but the reverse is not true.
  - gibybo 13y ago
    How is this true? Everywhere you can buy Bitcoins will let you sell them with roughly the same effort involved (except MtGox perhaps).
  - jnbiche 13y ago
    >You can easily buy bitcoins(houses) if you have the money, but the reverse is not true. With the exception of Mt. Gox, this is simply not true. It's hard to both buy and sell Bitcoins if you've not been verified at an exchange, but once you do that (not very hard), it's equally easy to both buy and sell. The only delay is the time needed for the wire or ACH to arrive. I get the feeling that many of you are talking confidently about something you have no experience with. Where are you getting the idea that it's hard to sell Bitcoins?
kazagistar 13y ago
What do you think determines the price? If you can't sell a bitcoin, you lower the price til you can sell it. If you can't buy a bitcoin, you raise how much you will pay until you can buy one. The only reasons it is different with houses is because people are emotionally invested in them, not all houses are equivalent (and thus their value is unique per house), and liquidity is hence really low, and market prices adjust slowly. Bitcoins are worth a thousand dollars because people who own them are not willing to part with them for less, and people who are buying them are willing to pay that much. This is economics 101. You can always cash out at the market price, unless liquidity is low; the only time that happens is in a teeny market or a crash.
- notdrunkatall 13y ago
  So profound a concept, yet so simple, and often at the root of so much fallacious thinking. Thanks for taking the time to educate our economically challenged friends.
jafaku 13y ago
Is the market price of houses $100 million though? No? That's what I thought.

patmcc 13y ago

Yes, but did they cash out into real currency? There are lots of "US dollars" on MtGox sitting in the accounts of people who sold bitcoins. It's clear someone has the US dollars; it's not clear it's in the hands of the sellers (or ever will be).