Quote from: Perspicacity on February 04, 2014, 03:14:54 AM

I don't believe the question can be intelligently answered, or at least addressed, until we get a handle on what, specifically, drives the price of a Bitcoin. This is the component of it that drives me crazy. Why do we think that more widespread acceptance will make the price go up, or this or that government taking a benign position on it, or whatever?

Let me put it this way...a dollar has the same "price", the same buying power, the same "value", whether a hundred thousand merchants accept it or a hundred million merchants accept it. The relative general acceptance of the dollar has nothing to do with its price or value. It certainly is a stablizing force, but not a price mover. I can't wrap my head around what, precisely, is driving the price of Bitcoin, up or down, other than the actions of a few wealthy Chinese speculators at this point.

Please, if I'm missing something damn simple, explain it to me. I would love to comprehend a connection between some market fundamental and the Bitcoin price.

It's not that simple. Value in money is very flexible and is based on international relationships...

You're considering 1 dollar to be the price of a dollar... That's not the case outside of the US. The value of the dollar increases as the amount of trade increases. The more merchants that accept dollars the higher the probability that the amount of trade will increase. If half of the merchants in the world who currently accept the dollar were to stop accepting dollars it would result in fewer goods and services available for purchase using dollars and thus a weaker dollar. Imagine the supply of goods and services available for dollars decreasing and demanding higher dollar prices for what's left.

Think of it like this; imagine a world with only 3 types of currency. Each currency will have equal amounts in circulation and the value of goods and services will be denominated as $...

Currency 1 GDP = $10,000,000,000 and will be stored as the variable "A"
Currency 2 GDP = $15,000,000,000 and will be stored as the variable "B"
Currency 3 GDP = $5,000,000,000 and will be stored as the variable "C"

The total monetary value for all goods and services traded in the world will equal $30,000,000,000 and will be stored as "X" as can be calculated with the formula "A + B + C = X"

You can more or less determine the value of any of the three currencies by solving the relationships between them. The value of currency "A" is 2/3rds of "B" and 2 times that of "C."

In this scenario you could infer that there are more goods and services transacting in currency B. Currency B is likely accepted by more merchants than A or C as can be seen by the larger volume of trade. It get's more complicated when you start inflating or deflating the money supplies and increasing the number of currencies but the principle still holds true.

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The price of Bitcoin is speculative not on the current value of Bitcoin; rather the survival of Bitcoin and crypto currencies in general. Here's why:

The market adoption that occurs as time goes on will increase the amount of trade in Bitcoin. As the amount of trade increases the value will increase naturally and progressively as more people use Bitcoin to store the value of their work.

Basically, the major motivator behind the Bitcoin price right now is the investors who favor the odds that it will survive long enough to account for a certain percentage of world trade. If you believe that Bitcoin will never do more than what is today's equivalent of 12 Billion per year in global trade then you should sell everything now as you would believe that the price per coin has peaked...

As it is now; the volume of Bitcoin trade is too low to justify it's current value. It's price is inflated because people think it will be used more in the future.

$10,000 per coin is an extremely low number and would allow for a peak market capitalization of around $120 Billion with 12 million coins in circulation...

Remember, currencies aren't valued on other currencies. They are valued on the amount of real world goods and services that are exchanged for them. People are only interested in exchanging goods and services for other goods and services. Currency is nothing more than a container to store the value of your work to be used at a future time for goods or services...