Quote from: delgas on April 16, 2013, 05:32:24 PM

Quote from: johnyj on April 16, 2013, 02:58:47 PM

Quote from: Impaler on April 16, 2013, 04:39:00 AM

johnyj: Imagine a Roulette wheel, sometimes you win, sometime you lose but on average it all even out (well accept for 0 and 00, but lets pretend those aren't their and instead your paying 1% conversion fee at an exchange which has the same net effect). Now would any sensible merchant agree to be payed with bets on a Roulette wheel? No because you ALWAYS lose in the end, you hit a streak of losses and are eventually wiped out, business need their operating capitol if they loose it they can't make another set of products to sell just like you can't make another bet. This is why stability is key.

This game is different, the house advantage is at bitcoin side, e.g. who hold the bitcoin wins long term wise. Because the fiat is inflated all the time (now 85 billion per month) and bitcoin supply is limited, the bitcoin value will increase over time

You're making a bold assumption that bitcoin wins in the long run.

I'll play devil's advocate here.

Imagine a scenario in which someone holds 10,000 or 100,000 bitcoins. Let's say, an early adopter, who mined them all. For the sake of argument, let's say bitcoin somehow magically reaches a value of 1,000USD per bitcoin.

You'll never convince the devil that such a person is better off keeping their "wealth" in bitcoin. Playing by the rules of fiat currency is much more advantageous to this imaginary person. To use basketball parlance, fiat currency is winner's outs. When you score, you get the ball back to score again. And when you have a shit load of cash, the rules are such that you AUTOMATICALLY make more money playing by fiat rules. No risk involved. Pretty genius, eh? Go ahead, try to convince the devil it's a better move to keep the bitcoins. Aside from TOTAL collapse of the fiat world (the devil knows this would have happened in 2009 if it ever was going to happen, and it didn't), there's much less risk in cashing out, because some other large stakeholder of BTC can cash out at a moments notice instead of you, screwing you out of millions or hundreds of millions in profit.

Truth be told, the devil knows the real issue is scale. An individual needs a lot less than 100,000, or even 10,000, coins to control the market, cash out and drive the market into a downward spiral. Cashing out slowly at first, then dumping the remainder at a particularly advantageous time to induce panic and intentionally tank the market. The perfect time to execute this would be right after the majority of fiat on the exchanges buys in to pump the price (the devil selling on the way up at a rate that keeps resistance low enough for the upward trend to continue), as we saw play out last week. There wouldn't be enough fiat on the exchanges (i.e. liquidity) to stop the downward trend. The bitcoin seller gets a multimillion dollar payday, and can buy their coins back at 1/10 or 1/100th the cost at the same time. And before you say that's not how it works, keep this in mind: we just saw this exact scenario play out, at a much smaller valuation, meaning there was a lot less money at stake than @ 1,000 per BTC.

The devil knows volatility rises as bitcoin exchange rate increases. The chance of total collapse of the bitcoin economy increases the higher the per-BTC price goes. There's way too much money at stake for that to not be the case.

The real value of bitcoin is determined by the amount of fiat sitting on the exchanges at any given point in time. And moving fiat onto exchanges takes several orders of magnitude longer than selling large quantities of BTC.

We saw round two of this great transfer of wealth play out last week. There will be many more, and the devil knows bitcoin is never more than a means to an end; big paydays for the whales. There are too many whales in the ocean for BTC to ever reach a valuation "true believers" on this forum are predicting.

The only solution to this problem is making transfer into exchanges easier and faster. And with unregulated exchanges, there's a snowball's chance in hell of enough fiat sitting at the ready to support large per-bitcoin values.

TL;DR - The real value of bitcoin is determined by the amount of fiat sitting on the exchanges at any given point in time. And moving fiat onto exchanges takes several orders of magnitude longer than selling large quantities of BTC. People aren't going to put millions or tens of millions of dollars on unregulated exchanges to support high per-bitcoin valuations. Periods of stable and/or rising per-bitcoin prices are just the snake coiling up to strike, nothing more.

What you are talking about is "exchange value", not real value of bitcoin

Let's back to the starting point: Now a new country has been established and there is a bidding for a new currency. There are two entities announced their proposal: One currency will be created by mathematical calculation and can be generated by everyone; the other currency is generated by a guy called DEF and he could issue as much as he will, based on his judgement of how much is needed by the country. Which solution will be more likely to be accepted?