Re:Bitcoin Conference London 15-16 September 2012
by malduarte on Tuesday September 04, 2012 @03:52PM
(#4476216)
Makes sense. The thing is mature markets also rely on the currency value fluctuating within narrow ranges. Say, in the plain old currency central banks act (fiddling with interest rates, etc) to keep currency value "stable". Given Bitcoin's decentralized nature, markets will have a hard time trusting it (if ever).
Re:Bitcoin Conference London 15-16 September 2012
by stevenwagner on Wednesday September 05, 2012 @02:44PM
(#4480764)
As you said, this is only a qualification of 'mature' markets. Also, central banks do not fiddle with interest rates to keep the value stable. They fiddle with interest rates to stimulate economic growth, which causes instability through bust boom cycles...kicking the can down the road.
For example, let's say their fixed costs are 21000 EUR, which would require selling 300 tickets to break even. At current prices (8.4 EUR == 1 BTC), 21000 EUR is equal to 2500 BTC. Let's also say that in order to pay back their fixed costs, they must convert any tickets sold in BTC back to EUR at whatever the market price is in the future.
So, assuming they charge 8.4 BTC per ticket, the risk is that the price of BTC goes down when it's time to convert their BTC to EUR. If they sell all 300 tickets, but the price of BTC halves, they may still be in debt 10500 EUR.
If the bitcoin trading markets were more mature, they could hedge against this risk by selling bitcoins short at the time they pay their fixed cost. Then, if the bitcoin price does go down, they will make money on the short sell, and still be able to repay their fixed cost. If the price of BTC goes up - then hopefully they will sell more tickets (since they will be a better deal now), in order to make up for the money they lost on the short sell.
Hopefully next year they'll be able to charge tickets in BTC. Trading markets will hopefully allow more complex trades which facilitate hedging. Also hopefully the price will be more stable, which will reduce the need for hedging.