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Board Beginners & Help
Re: Bitcoins heavy price movements unfortunately show the advantages of fiat currenc
by
Nath
on 13/06/2011, 15:47:44 UTC
If you want stability, I'm sure you'll be able to find people who could provide a good stream of bitcoins at prices well above current market rates that are almost constant. For example, if there was an imaginary exchange that only sold USD for BTC at a constant rate of 60USD/BTC (much higher than market value) would you be happier because of stability?
Only if I would be able to sell them to this prices, too. Which isn't possible, of course.

You (and lots of other people here) make the big mistake to look at BC only from a "consumer point of view". But to make BC succeed, the people who sell things are at least as important, if not even more so.

Now imagine you want to sell goods over the Internet. Do you really want to think about massive price fluctuations of the currency people pay you with? For certain goods (like drugs or porn) this may not be a problem because the advantages of BC are bigger. But if you sell for example computer hardware over the net, you have small margins and need some price stability. If you can use a fiat currency for this and only switch to BC directly before and after the trade (with a reduced risk of losses), this may work.  But how would BC replace fiat currencies, if you still need them as a "safe haven" for trading?

Also people need to consider the emergence of a derivative market for BC in the near future. This would increase fluctuations even more and could lead to additional risks and market manipulations.