Quote from: Inedible on October 22, 2011, 08:09:13 PM

In the grand scheme of things I'd say if you let the merchants do their thing first, Bitcoin gains traction as a currency, everyone wins. If you let the speculators do their thing first, there might not be anything left.

+1

Quote from: P4man on October 22, 2011, 08:47:15 PM

... [price volatility] basically makes a bitcoin economy almost impossible. The only way to use it is buy the bitcoins before your purchase, with the merchant selling them for dollars instantly with bitcoins never remaining in the economy. Thats not entirely useless, but really not what it could be.

.. This daily buying and selling makes no sense, it is a lottery. Its literally a zero sum game. If you want to speculate, at least take the long view.

+1

I agree. From a merchant's perspective, volatility makes bitcoin a nightmare to do business in. Some speculation is necessary, to ensure that hardware, goods and services required for the bitcoin economy (but cannot as yet purchased with bitcoin) can be obtained with fiat currency. But when nobody wants to leave any capital within the bitcoin economy, it is extremely difficult to operate a business under these conditions.

It's hopeless to expect speculators to only take the long view, and since there is no defined floor for the price of bitcoin, any merchant who adopts it is taking a huge risk. As a bitcoin merchant, you have no option but to force yourself to assume an overly optimistic and bullish outlook, whether you believe it or not. So the only merchants who will adopt the system are those who can successfully delude themselves. Do we want to entrust the development of the early bitcoin economy to irrational people?

With speculators buying and selling schizophrenically, sending the exchange rate wild, rational entrepreneurs naturally find it difficult to maintain this optimistic outlook when they see such bearish signals coming from the markets and then feel their balance sheets squeeze and expand within no defined range.

It is going to take some time still for all those irrational speculators out there to get bored of their zero sum game and realize that it is a pointless exercise before we get any kind of economically viable environment for businesses to operate in.