Post
Topic
Board Speculation
Re: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion
by
Erdogan
on 15/11/2014, 16:39:11 UTC
In a steady-state system, the price of a monetary asset is given by the "quantity theory of money", which states that:

P x Q = M x V, where

P is the price of the goods, Q is the amount of goods bought by the monetary asset, M is the amount of monetary asset in circulation, and V is the average velocity (the number of times per year that a given bitcoin is used to buy something).
Dump the velocity. and you are good to go. It has to be liquid, the owner needs to know that he can easily get rid of the bitcoins, actual trades are not needed.

You cannot ignore the velocity.  If everybody would pay their bills the same day they get the money, instead of waiting to the end of the month, the same amount of trading would require 1/30 as much currency in circulation.  If the currency it bitcoin, the smaller demand would imply a lower value per BTC.
[...]

If you have money, change your mind to having a car instead; someone else having a car, but prefers holding money, then the two switched roles, and no change in demand for money or cars happened. So it depends on the seller, does he have the same wish to hold money as the buyer before he decided to buy?