[BrianEatWorld]

It seems funny to assume that. I mean I haven't been tracking the underlying fundamentals, but the nature of most currencies today is that because they are managed, they tend to go up and down. If the fundamentals are solid for Bitcoins, as in there is actually increasing demand (which seems feasible given all the new services advertising their acceptance) and the supply is increasing in tune with expectations (which seems feasible given that it can be forecast with a fair amount of accuracy), this may just as well be the time to buy as it is to sell.

I guess human psychology could also play a part in thinking this is the time to sell, but do the fundamentals actually seem questionable to you?

[polshaw]

Everyone holding Bitcoins is a speculator. If they believe the price is only going down, they will sell and crash the market, just like before.

Notice i did not say everyone using bitcoins are speculators.. but if you are say a merchant with goods available in bitcoins, (and you don't wish to speculate) you will peg your price to your local currency, and after selling your goods will sell your bitcoin immediately for local currency. Which means you are no longer holding bitcoin or having any impact on bitcoin demand.

[Helianthus]

I don't believe that you actually have any understanding of the supply/demand economics of booms/busts necessary to be skeptical of parent.

Increasing demand of a finite resource drives the price up. This drives the demand up even more.

The real value of a Bitcoin is still in USD, of course, so at some point it's going to cross over a line where the people holding Bitcoins want to get rid of it.

Decreasing demand of a finite resource drives the price down. This drives the demand down even more.

The fact that the price is accelerating so quickly indicates a runaway effect.

What, do you _really_ think the real-world USD value of all the Bitcoins in the world has doubled in two weeks?

[BrianEatWorld]

Your analysis holds true if you are treating bitcoins as purely speculative.

You are correct that I don't fully understand supply/demand economics, because as an Austrian theorist, my concepts relating to booms and busts use dynamic models and not the statics you are using to prove your point. In a static situation, increasing demand of a finite resource does drive the price up, which can drive up demand even more, but thats if you ignore the effect of substitutes, which for both the exchange and speculative value of bitcoins, there are several.

Do I really think that it has doubled? No. But I don't think that people expecting a large crash like before are doing so because they understand the fundamentals. I think, as in any market, you do have speculators, but I also think that the legitimate demand for bitcoins as a means for exchange has gone up since the previous crash providing a more solid basis for the higher price.

[Helianthus]

>Do I really think that it has doubled? No.

Then it sounds like the speculative bits are driving, even if there are other passengers in the car.