Quote from: nighteyes on October 25, 2011, 04:28:06 AM

Quote from: zhoutong on October 25, 2011, 02:41:05 AM

But speculation isn't entirely worthless. Greed is human nature, to a large extent, short sellers, day traders and HFT bots actually counter human greed because they believe in price convergence. About 80% of trading in forex market is speculative, but they indeed make the rest 20% better off.

I always believe that the best way to counter bubbles is HFT. HFT bots catch tiny profits and destroy the dreams of greedy "investors". What's buy-low-sell-high? It's price stability.

At the beginning, speculative trading may cause volatility because of the market power being controlled by a few hands. So we need more speculators. They provide liquidity for everyday bitcoin transactions. They bring Bitcoin closer to our real world economy.

Without speculation, we can hardly produce any goods or services in Bitcoins efficiently.

If there's anything harm about speculators, it means we need more of them, not less, in absolute figures. The way to make the pie bigger is to convince real world merchants to accept Bitcoin, but not criticize the speculators and ask them to provide services instead.

Few points:

#1: Hoarding bitcoins is not like putting money in a bank. The money on "forex" is not being hoarded...its being put to use. The forex acct doesnt take physical receipt of the money and just sit on it.....unlike you. At best, the money you get is working for the govt economy, not bitcoin.

#2: Bitcoin speculators dont provide liquidity....all traders do is seize up the supply and hope the price rises....creating an artifical bubble of higher prices....making it more EXPENSIVE and thus less work(and trading) gets done. All they do is create paper profits and losses, not economic gains. The only people you get to trade are more speculators.

#3: The problem with speculative bubbles of your kind is they are leveraged....so not only is something amiss, we dont even know if you can handle the exposure and all your contracts can be unwound. That includes depending on you not to bet against your customers.

Its kind of interesting that you are so against providing your bitcoins to be put to use. Im always looking for that in any currency, since that means interest on my holdings. You make it sound like this is OWS(Occupy WallSt)....not the case. A growing bitcoin economy only makes your position better in the long run.

0. This post is not about Bitcoinica, or leveraged speculation in general. I was saying that the mindset that Bitcoin is only useful when we can provision goods and services without having to change Bitcoins into other currencies is not correct.

1. If you want to grow national economy, just use fiat currencies. There shouldn't be any difference between the fiat economy and Bitcoin economy if you really use Bitcoin as a currency. The problem of Bitcoins is that people want to isolate them from the real world. In the very short run, holding USD and holding BTC make no difference to everyone. The Bitcoin economy is not so advanced that banks (or e-wallets or exchanges) can use the deposits elsewhere for investment. At this moment, most people think these are scams.

2. Last week I bought a website for $10,000. The seller and I both agreed that PayPal's awful and international wire is too slow and inconvenient. So we decided to go with Bitcoins even though the guy didn't know anything about it. He was surprised that I had managed to sell 2,000 BTC for $10,000 in a few hours. Who bought those coins? Speculators! Well, another guy is on board. Who else can provide liquidity? If there's no speculators, merchants can't sell their revenues and make products. Also, if you really use Bitcoin as a currency, what does high prices mean to you? Nothing. I was encouraging merchants not to afraid to exchange Bitcoins to other currencies, because Bitcoin is not an investment vehicle for merchants. If the market is stable, they hold, if not, they buy and sell - it's perfectly natural.

3. I know my risk. You don't have to tell me that I shouldn't take too much risk.

I'm never against putting Bitcoins into use. When did I? I against the view that speculators are bad for Bitcoin. If we want to make Bitcoin economy a bigger pie, we shouldn't criticize speculators and investors. They are a very important part to our economy.

Why the registered users doubled in May? Because of media and speculation. At least it makes a lot of people suddenly aware of this stuff. It also reminded me, who will be developing a series of apps to contribute to the community, that Bitcoin is something noteworthy. (I was aware of Bitcoin more than a year ago, I mined some coins (a few hundred) and lost them because they had no value to me. Bitcoin came to my attention again when its value is more than $1.)

The market is always correct. It's just something that everyone follows. It makes no sense to determine the nature of a particular trade - the nature doesn't determine the value. Speculators are the people who "wow" the new adopters, including me in the past. I know the economic importance, philosophical value, technical elegance and social effect of Bitcoin, but at the bare minimum, I know it's something worth trading. We simply can't expect anyone to appreciate a currency without showing them the money and the market.

What's unique about Bitcoin in the very short-term? (Most people think short-term only when they decide whether or not to learn it more. Early adopters of Bitcoin should all be curious, adventurous and open-minded. So they may think long-term. But it's entirely different when we convince others around us to adopt it.)

- Controlled money supply. (I don't think 99% of general population cares. They can't even link the increase in price to the increase of money supply.)

- Sending money in seconds. (Most people send money for consumption. We have credit cards.)

- Irreversible transactions. (Consumers think reversibility a protection. Merchants always strive for conversion rates.)

- No government control. (Over 99% don't care.)

- Unique products? No. Unique services? Hardly any.

- Speculation and investment! This is the main entrance of new Bitcoiners. Many people around me care about a "diversified currency portfolio", and they all agree Bitcoin should be in their portfolios, but they don't really care about the rest.

Bitcoin has the potential to make people feel their lives are being wasted with taxes, inflation and endless debts. But at the very beginning, what we need is:

- Miners to protect the network

- Speculators to provide liquidity

- Investors to increase the value

- Organizations to accept donations

- Consumers to buy the products

- Merchants to sell the products

Without anyone of the above, Bitcoin economy is just a joke.

So, if you are a speculator, good luck with your trade. If you are a merchant, keep selling. If you are a consumer, try to spend Bitcoins if you can. If you are a wealthy investor, make Bitcoin a part of your portfolio. Whoever you are, invite others to join, and we should all do what we love doing.

The human economy is a complex system with full of decentralized decision making, self-interests and property rights. For it to work, we shouldn't stop disrupting others' work. An economy is just a natural mixture of different human behaviors, and Bitcoin deserves to be the same.