The thing is, it doesn't matter. As far as I know, nobody prices anything in Bitcoins, they price things in USD/AUD/<insert currency> and then convert that amount to Bitcoins for the transaction.
You might end up paying 1.00 BTC, or 0.6 BTC, but it still works out to the be same in USD/AUD/<currency> (numbers made up for example)
I feel like I'm missing something, but I can't quite understand the advantage of Bitcoins in this kind of scenario.
Who's handling all the instant real money conversions, and why wouldn't they just transfer the real money between accounts directly rather than converting it?
It's not that instant real-money transactions are happening, but if I owe you $5 USD, I can say "I'll pay you 0.1142BTC" and the value to you is the same (as others have said, as long as the exchange rate doesn't fluctuate too much)
It's interesting how 'Bitcoin falls $10!!' is news, while the fact that it's gone up 50%+ in less than a month, and over 1000% in 1 year somehow is not.
etc, plus the many stories about ability to pay for things like Reddit Gold, domain names, and more with Bitcoin.
1) You may hold Bitcoin, and talk from detractors is always frustrating.
2) Many Bitcoin advocates (I've mined and held Bitcoin, so I'll count myself in this crowd) tend to extoll Bitcoin's virtues, while downplaying or explaining away downturns
3) Even if it were true that the drop were news while the gain wasn't, that's how things work around here. Much has been made of Apple's stock drops, but in every case, Apple was actually up year-over-year, and it's 3 and 5 year price was way up.
Also, keep in mind this is nothing new. When it fell from $30 down to about $3, I heard the same complaints. Lot of people made a lot of money then; a lot have made $ now. Conversely, many lost huge then, and who knows what will happen now. It became so bad it cost more to mine than the resulting coins were worth, and I turned off my rigs. (Eventually sold them)
Bitcoin is a volatile, fun place to be. It's easy to convince yourself when it shoots up that you're a freaking genius for getting in it. When it goes down, the detractors think they're the ones with the clue. I think both groups suffer from confirmation bias, and this thing has several years before true stability.
My guess is that a LOT of the Bitcoin owners today are early adopters that own very little BTC as a novelty and/or with the idea that "Hey, who knows. Maybe my 4 BTC will be worth $1000s in a few years".
This makes for a super volatile market. Especially coupled with the new Mining ASIC rigs coming to market, small volume trading etc.
I would suspect that it will take a LONG time before we see if/how the 'currency' will actually stabilize.
One must remember, less than 5 years ago, BTC were selling for $0.001! Today it topped out at around $50.
that's pretty much what I'm doing. I bought 3 on the chance that they pop up at some point. I'm not fully convinced of their stability, and I'm not going to drop thousands into it until I feel better about it- just don't have the funds or risk appetite for that much outlay.
Something else people seem to forget is: This is an unregulated electronic currency without a paper trail.
Can you say "A market that a group of people wanting to rig value would LOVE!"
Nothing (as far as I can tell) stopping a group of large BTC owners to completely run the price on BTC to their advantage. Wouldn't even take that much money to drive prices, and impossible (almost) to detect and do something about.
What do you mean no paper trail? I thought Bitcoin worked by having a master list of EVERY transaction and then hashing the most recent for each new transaction.
This is from the Bitcoin doc [1]:
We define an electronic coin as a chain of digital signatures. Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.
Transaction records? Yes. Tied to a physical person? No. There is as far as I understand nothing hindering private trades among owners, making 'rigging' entirely possible (I may be wrong).
Just looking at Mt. Gox, the volume in each hour of the day is such a small representation of the overall amount of BTC out there, it seems perfectly reasonable you'd see such crazy swings. Most hours it seems there is <= 5,000 volume. If there is no real liquidity when buying or selling any instrument, the price will swing.
There's a natural monopoly in a medium of savings used to defer consumption. Among competing currencies, the winner is the "bubble that doesn't pop". Until the monopoly is established, though, volatility is to be expected, as it would be with any bubble.
I don't understand bitcoin (any links for newbies?). Why can't they just make it equal to the US or a Euro but use the bitcoins for the actual transaction which would still grant you the anonymity you want and not have this bubble behavior?
The issue is the price is not set by anything. Someone could set up an exchange where they sell bitcoins at 1 US dollar but then everyone would buy all their bitcoins and sell them at other exchanges. Right now the only thing saying that bitcoins are worth $40 each is that someone is willing to pay $40 for them.
Bitcoin can't stay cheap forever, either more people use it and it has to gain value (because its so small at the moment) or people stop using it and the value ends at 0.
Those are your two options. Grow until the Bitcoin economy is worth some 10 Billion at least, or it'll be evidently dead and close to 0.
Its much more unlikely Bitcoins will stay around $20 - $60 for the next 5 years. (Although still possible)
What makes you confident that you know that the current price is "VASTLY" above the "fair market value?" I thought that markets determine fair market values--which is exactly what's happening at the exchanges.
Of course, but with a young currency without a set 'backing' (Gold, merchandise etc) I am just saying that looking at historical valuation makes it seem like the massive value increase would speak for it being valued fairly high @ $40
I prob wouldn't mix the term 'Economics 101' with a early adopter currency that has fluctuated between $0.001 and $50 in less than 5 years and between $5 and $50 in the last 10 months.
It is my impression that BTC are mostly used by people who either a) want to stock up for the future "just in case" or b) want to minimize their digital paper trail for online purchases.
Think of it as "cash" but for the online world. Some people pay cash for everything possible just to eliminate the paper trail. Not because they have anything to hide, but just to reduce their digital footprint. A noble goal, I think, and one that I'm glad to see is starting to become a realistic goal online.
You might end up paying 1.00 BTC, or 0.6 BTC, but it still works out to the be same in USD/AUD/<currency> (numbers made up for example)