Quote from: 3phase on August 31, 2011, 05:14:51 PM

Quote from: IdeaMan on August 31, 2011, 03:55:46 PM

Only speculators want the market to stay volatile.

Sorry man, you got this one wrong. It appears that you want to abolish speculation (in an admittedly speculative market, but that's another story). Well let me tell you that funnily enough, they do want it to stay volatile, but they also stabilize it with their trades.

I don't want to abolish speculation - I just think that the amount of speculation we have is damaging to BitCoin as a whole. This is a spurious argument - speculation is just people pulling out random numbers and pricing it for profit when possible. Nothing about randomness lends itself to stability.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

Speculators cause stability in the market

No, they are the primary cause of instability in the market. If every speculator valued BitCoins at or around the same price, that would be the exception to this rule.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

If they weren't there, who on earth would ever buy a plummeting commodity or asset?

Or cause it to plummet? For that matter, how could it plummet if it had a stable value? Therefore it must not have a stable value, and the spikes and free falls are the result of speculation in the market - some speculator buys or sells many BitCoins at once, the price (being the only indicator of value) shifts dramatically, and the market shifts suddenly to match the new price. This is not the way a currency behaves, and it is the reason Bitoin hasn't been accepted as a currency, and will not be accepted as a currency for the foreseeable future.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

Without speculators it would drop to zero.

This statement is correct - because the value of BitCoin is primarily determined by speculation interest, not actual value.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

Or the opposite, how would you ever get a rally in a downward spiral if it wasn't for short covering?

And why would we need one if speculation didn't result in a downward spiral? In the instance of a stable currency, small shifts are met by immediate response in the free market - that's because the value is stable regardless of the price, and a shift to benefit a FOREX trader will be taken advantage of immediately.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

So don't blame speculators so easily. Yes, they make a lot of money with volatility, but have in mind that they also risk their pants too.

I don't blame them easily, I blame them logically. The ridiculously high current price of BitCoin is a function of speculation alone. That inflated perception of value (not actual value) is where most people stand to lose money - the speculation risk. So basically the speculators are taking on risk for no logical reason except to assume the value will go up - which it only will actually do in the long term if the speculation stops and the BitCoin becomes a real currency.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

See as an example the recent short selling ban by several European governments, imposed on the Stock Exchanges. The result of such moves in the past has always without exception been a stock market dropping more rapidly than before the ban. Why? Because speculators are not allowed to participate in price discovery. Greek stock exchange is down 16% since then, and it was falling at 5-8% per month before.

I should probably explain that commodities and stocks are not currencies. They behave in different ways, most notably in the amount of value they represent. Commodities and stocks are more volatile than currencies traditionally. In the example of BitCoin, it is more volatile than almost any stock or commodity that exists. That is not the behavior of a currency. Using non-currency examples proves nothing except that you do not understand the word "currency" and the implications the definition of that word holds for BitCoin.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

If you don't believe me, check the indexes of the exchanges that banned short selling 2 weeks ago, and compare them to the indexes in 2 months time (end of October). Or check the recent history in the NYSE (2008 autumn).

You may be correct about the Stock Exchanges in Europe. But compare the market movement in the currency space over the same time (or almost any other time), and you'll find they stay mostly flat. This is why people care about the value of the USD falling dramatically - it's not supposed to do that, it's a currency.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

It might seem counter-intuitive but this is the case.

It seems counterintuitive because it's incorrect. Your logic uses flawed assumptions - like BitCoin "is a stock", or "isn't meant to be a currency".

Quote from: 3phase on August 31, 2011, 05:14:51 PM

And I'm putting this here, because I had the same delusions as you present above, about speculation, before I finally understood what's going on in money markets.

One of us is clearly confusing commodities and stocks with currencies and laboring under the delusion that all financial assets do or are meant to perform the same way. The only reason I can think of to make this argument is that you are a speculator, but I suppose you could just be wrong about it.

Quote from: 3phase on August 31, 2011, 05:14:51 PM

Hope it helps.

No, not really.