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There's no such thing as "default price pressure" (up or down) in financial markets. Every trade has both a buyer and a seller—for someone to have sold bitcoin

There's no such thing as "default price pressure" (up or down) in financial markets. Every trade has both a buyer and a seller—for someone to have sold bitcoins, someone else has to have bought them.

natrius 12y ago
This sounds true, but it's not. First of all, the supply of bitcoins increases every day when they are created out of thin air. Even without that factor, having a buyer and a seller doesn't mean that prices can't have a tendency towards a trend. People who purchase goods and services with bitcoins usually aren't making a calculated decision to sell bitcoins for dollars, but that's what they're doing when they pay with bitcoins. Humans aren't rational actors, especially when you try to judge their actions in a single market without considering other motivations.
logicallee 12y ago
Imagine if any two people who reside in the Bay Area would receive $3M at a $10M valuation within three weeks of asking for it (no questions asked) as long as they have incorporated and one of them can program. What do you think would happen to the Bay Area housing market in this situation? How can you not call it "buy pressure"? Note: interestingly this is an extreme an unrealistic example, but it's not far from relaity!
joosters 12y ago
Not at all. 'Real money' currencies are inflationary, for lots of reasons, including the fact that we keep printing more money. If I stash my $millions under my mattress for a decade, do you reckon they'll be worth less or more after that time? Bitcoin however has deflationary pressures, because there's a fixed upper limit on the coins (21 million) and they become harder and slower to mine. With a price of (say) $1000/BTC, that means there can only be 21 billion dollars worth of bitcoins out there. But if you expect bitcoin usage to explode and account for trillions of dollars of wealth, then the bitcoin price has to increase.
joosters 12y ago
'More buyers than sellers' is a perfectly reasonable statement, and v-v. If one side competes more for trade, then it will have a price pressure. Say you ran an auction of goods (paintings, junk, whatever) with 10 potential buyers in attendance, do you think you'd get higher or lower prices than if you ran an auction with 1000 buyers in attendance?

natrius 12y ago

This sounds true, but it's not. First of all, the supply of bitcoins increases every day when they are created out of thin air. Even without that factor, having a buyer and a seller doesn't mean that prices can't have a tendency towards a trend. People who purchase goods and services with bitcoins usually aren't making a calculated decision to sell bitcoins for dollars, but that's what they're doing when they pay with bitcoins. Humans aren't rational actors, especially when you try to judge their actions in a single market without considering other motivations.

logicallee 12y ago

Imagine if any two people who reside in the Bay Area would receive $3M at a $10M valuation within three weeks of asking for it (no questions asked) as long as they have incorporated and one of them can program. What do you think would happen to the Bay Area housing market in this situation? How can you not call it "buy pressure"? Note: interestingly this is an extreme an unrealistic example, but it's not far from relaity!

joosters 12y ago

Not at all. 'Real money' currencies are inflationary, for lots of reasons, including the fact that we keep printing more money. If I stash my $millions under my mattress for a decade, do you reckon they'll be worth less or more after that time? Bitcoin however has deflationary pressures, because there's a fixed upper limit on the coins (21 million) and they become harder and slower to mine. With a price of (say) $1000/BTC, that means there can only be 21 billion dollars worth of bitcoins out there. But if you expect bitcoin usage to explode and account for trillions of dollars of wealth, then the bitcoin price has to increase.

joosters 12y ago

'More buyers than sellers' is a perfectly reasonable statement, and v-v. If one side competes more for trade, then it will have a price pressure. Say you ran an auction of goods (paintings, junk, whatever) with 10 potential buyers in attendance, do you think you'd get higher or lower prices than if you ran an auction with 1000 buyers in attendance?