Quote from: znort987 on June 30, 2011, 11:34:49 PM

Quote from: qualia8 on June 30, 2011, 11:27:02 PM

What will you do if bitcoins drop to $5 but hold very steady there for the next two years. Assume that the bitcoin economy grows, slowly and steadily, all that time and that mining remains profitable, but only marginally so as difficulty adjusts as soon as more GPU power comes online.

I believe that there is a built-in contradiction in your scenario: the
basic theory behind fiat currencies is that the rate at which currency
is created should correspond to the rate at which wealth is created
(goods, services, etc ...) for it to remain stable wrt other currencies.

Apply this premise to your scenario: how can the economy grow and
the currency drop ? The only two ways that can happen are:

   - the bitcoin economy grows exactly at the same pace BTC are minted -- unlikely IMO

   - the USD value drops fast enough to compensate for the delta between BTC mint rate and bitcoin economy growth rate
   Possible, but also unlikely.

Here's the thought. Most of current value is speculative. Suppose the bubble "bursts", but still some speculators remain. Those speculators leave at the same time as real BTC economy grows. Thus the price remains steady at $5. Unlikely? Yes. Impossible? No.