Re: Keeping Bitcoin Price High

I'm trying to think of ways to have Bitcoin keep its value, instead of always fluctuating up and down. As far as I know, it rises because lots of people buy coins, and once it hits a certain point, someone decides to sell a large amount, so the price drops a little bit, causing everyone else to sell, dropping the price lots. It falls down, until it hits a low enough value that people wish to "buy back in", and then the price begins to rise again, and the cycle repeats.

My idea is that instead of waiting for the price to rise to sell coins, wait for the price to rise to buy something with coins. Go to coingig, or bitcoinstore, and find an item that you want, and tell yourself "When Bitcoin hits 120$ (or any price), I'm going to buy this item instead of selling to an exchange.".

I think that this would help keep the price stable, as well as distribute the coins more, instead of keeping them all locked up in an exchange.

EDIT:: My knowledge of economics is minimal, so I could be way off.

If you go to a store and use your bitcoins to buy something, the guy who just got them will dump them in the market, so the overall effect on the price is very small.

Just to be clear, there is a very small effect, since there is that 1 hour wait for confirmations before the other guy can dump them on the market, but like I said it is a very small effect.

Thats not 100% true. There are services/exchanges that will let you cash BTC without any confirmations

Right, so then instead of waiting 1 hour there is no waiting, so it makes even less impact on the price. Thanks for accentuating my point for me.

You're not clear on the velocity of the marketplace. At this moment in time, being able to convert to fiat instantly is NOT a good thing. You WANT people to stay in the world of BTC. BTC will never be a viable currency until people want to earn it, spend it AND hold on to it. Otherwise, its just a play thing that no one will take seriously. Besides, the trading is so thin right now that a couple of large purchases that are instantly put on Gox can have a widespread, negative effect. In my experience (keep in mind that I deal with some LARGE wallets) it can take as little as 100BTC to really affect the price. When I have 150+BTC to sell I take my time, usually at least 24 hours, sometimes more.

Oh, I think I understand about velocity. The higher the velocity, the lower the price can go. I am just saying that we have very high velocity, so it does not matter if you sell your bitcoins for fiat or if you buy something and that guy sells the bitcoins for fiat, the effect is the same. There is not much we can do about it either, unless you have several million dollars lying around to hold the price steady yourself.