Bitcoin and positive vs. normative economics

Re:Bitcoin and positive vs. normative economics by username223 on Saturday December 28, 2013 @03:17PM (#6976294)

Maybe some day Bitcoin will be a cheaper way to transfer money than EBT, credit cards, etc. (a few percent). If/when that happens, people will hold Bitcoins for just long enough to complete a transaction -- microseconds -- rather than for however long it takes them to cash out their speculative bets.

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Re:Bitcoin and positive vs. normative economics by MarkPNeyer on Saturday December 28, 2013 @03:45PM (#6976470)

Yes. This is already happening to a small extent, and the use of bitcoin as a money transfer mechanism is where the value comes from. People who wish to transfer money using bitcoin do not care about the market price; if they have $1000 USD to send, they buy $1000 USD worth of bitcoins at market price, send them over the network in seconds, and then that value is converted into cash locally. They don't care about the market price, as long as it isn't volatile over the short time it takes to move the value.

The market price of bitcoin is determined by the number of bitcoin holders who think they will go down in value; as coins gradually transfer to the hands of people who believe they hold long term promise, the market price of 'loose change' available for transfer will rise; that rise in price will actually _increase_ the use of btc as a transfer mechanism because it will attract more people seeing BTC as a store of value, which increases the store of bitcoins held for long term positions and thus the market price of BTC, etc. The increase of its usage as a medium of transfer ALSO increases the market price of BTC; that interplay between new value-minded long term investors and new users of btc as a transfer mechanism is what has been pushing the price up continually. the entrance and exit of speculators in the market is a short term distraction that has the benefit of spreading awareness but the drawback of adding to conception as a bubble.

after about the 6th or 7th one of these 'boom and bust' cycles that triples/quadruples the market price, people will stop seeing this as a 'maybe' thing, and my guess is that will drive a massive one-time spike in the value.

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Re:Bitcoin and positive vs. normative economics by lutorm on Saturday December 28, 2013 @05:07PM (#6976851)

as coins gradually transfer to the hands of people who believe they hold long term promise, the market price of 'loose change' available for transfer will rise; that rise in price will actually _increase_ the use of btc as a transfer mechanism because it will attract more people seeing BTC as a store of value

This sounds backwards to me. If I think the value will increase, I'm not going to transfer them to you at today's price. So this will decrease the amount of transactions, making it less and less useful as a transfer mechanism. Which is exactly what people say is the problem with deflationary currencies.

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Re:Bitcoin and positive vs. normative economics by DennisP on Saturday December 28, 2013 @07:49PM (#6977477)

By the same argument, if you think the value of bitcoins will increase, you shouldn't spend your dollars either. You should convert them to bitcoins and hold them.

If you do spend dollars, you don't lose anything by converting them to bitcoins just before spending them.

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Re:Bitcoin and positive vs. normative economics by lmm on Sunday December 29, 2013 @06:24AM (#6979248)

So there'll be a deflationary spiral where the value of bitcoins goes up and up, until the only people who have bitcoins are the idle rich who won't sell them at anything less than extortionate prices. Which is not a situation I see as sustainable; at some point the actually productive people making economically valuable things will realize that rather than funding this bunch of freeloaders, they should stop accepting bitcoins as payment.

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Re:Bitcoin and positive vs. normative economics by MarkPNeyer on Monday December 30, 2013 @04:56PM (#6987278)

The rates at which bitcoin holders sell them won't be 'exorbitant' because they'll be irrelevant for peopel using them as a transfer mechanism. if you want to send a thousand bucks, and there are many bitcoin holders just sittign on them, the market rate of btc won't matter and you'll be able to quickly sell them whenever you've sent the btc where you wanted to.

those 'unproductive' people holding incredibly valuable bitcoins will enable bitcoin to work as a dirt cheap payment processing system.

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Re:Bitcoin and positive vs. normative economics by richcollins on Saturday December 28, 2013 @04:02PM (#6976561)

This would create a floor on price ... which would then make it useful as a store of value (since there is a high probability that you'd be able to sell them in the future).

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