I really think the bitcoin economy would benefit a year or two from now if federal regulators "cracked down" on it and required licensing to buy/sell USD for BTC. Why? Restrictions between BTC and USD would foster more BTC based production (natural resources, goods and services) even if costs currently favoured USD production because producers *want* BTC for the long run and can't acquire it anonymously through USD exchanges. Plus BTC thrives wherever people want to do private business *privately.* Conversely, if federal and state drug laws were abolished that would temporarily set back some valued BTC utility. Of course, USD inflation will probably be the final driver for BTC.

Bitcoin cannot claim eternal divine perfection, so inevitably there will arise a "NuCoin" that has the same nice properties but is technically better in some respect -- and will therefore replace Bitcoin as  the preferred medium of payment for internet commerce.   

What will happen to the Bitcoin then? Owners of course would like to swap them for equal worth of NuCoins.  But who will agree to the swap?

Its also possible to work out when its going to crash, because nothing should double in value within days - that is just stupid!

When it does that, you need to sell a little of your investment so that you get some profit.

Within a week or so, it will drop in value by about 30%, and that price will almost be stable and will last for a month or two, before it all starts to go nuts again.  

Well done, man!

That flaming was indeed not justified. I think people just thought you were panicking.

It makes sense that they would short BTC, then switch to mBTC, make stupid people panic.

They could either went short on BTC or bought it cheap 2 hours later.

It's very possible that the mBTC switch was a scam attack.

There may be reason to use mBTC but stability isn't one of them.

Have you recently checked the price of bitcoin...

It's scaring me..

if they panic in the face of losing a couple million, why wouldnt they? would you care if others are hurt if you can cash your 10 million dollars out today without the risk of losing all of it due to some Chinese regulation? Or would you hold on to it in the hope that one day it will be even more? I would dump. and then cash out in CNY.

this volatility is clearly not due to the regular investor, rather those with thousands of coins playing the market every day and making more and more.

Is is generally accepted that this is one of the reasons BTC is dropping in value to USD yesterday and today?  IF so, why?  because there is no longer a large demand for it?

If so, what happens if the US bans it?  Could we expect it to drop more?

Is Bitcoin primarily a medium of exchange or a store of value? No financial instrument can be both things equally well. Despite what some Bitcoin proponents believe, specialization in one direction is inevitable (many people who seem to think it can somehow be both are the same ones advocating 'buy and hold forever'...).

Bitcoin is my exit plan.

BofAML's David Woo recently published a "fair value" for bitcoin which included, "Bottom-line: maximum market capitalization for Bitcoin’s as a store of value = $5bn".  This was based on an assumption that Bitcoin will likely not compete meaningfully with gold as a store of value, because it's so volatile and new.

But I wonder how important gold's current volatility is to its owners.  I've been operating under the assumption that gold's modern role in the economy has largely been a hedge against the tail risk of systemic failure of the financial system, and that this is because it's been safe to assume that in a post-fiat world, gold would be remonetized.  Ben Bernanke stated this in response to Ron Paul asking him whether he thought gold was money, and it seems kind of obviously correct to me.  But if gold were to become remonetized, then its volatility would presumably be significantly less than it is currently.

It seems to me that the existence of Bitcoin brings into serious question the assumption that gold would be king in a post-fiat world, and that bitcoin's current relative volatility is rather meaningless for this question.  This would mean that if you're holding gold as a hedge, then you also need to diversify into bitcoin to "hedge your hedge".  I have no idea what percentage, but can it really be assumed to be zero, as Woo implicitly assumed in his analysis?  Even a single percent would introduce massive error in Woo's analysis.

Am glad that things have unfolded as they have today, has given me an opportunity to test my "Exit plan". Getting coins to the exchange (taking into account confirmation time), making sure that my trading limits are sufficient etc.

Guess what? That is not Ron Paul's definition, because he's not an idiot out to confuse people--he's out to educate them and commonly calls inflation a form of theft.

I'd rather go for appreciating/depreciating currency instead of deflationary/inflationary currency, which is what most people actually mean. This would be much more intuitive for an average Joe and easier to explain without losing the accuracy of the notion behind it. So we wipe out the possible misunderstanding caused by different definitions of inflation/deflation you rightly refer to (and probably would give rise to new terminological tensions)...

The problem is that there are two definitions of inflation/deflation which are used by different people. There is monetary inflation, measured by the total amount of money in the economy, and there is price inflation, measured by the change of price of everything. Usually if you have monetary inflation you will also have price inflation, but it does not always happen that way. Bitcoins are an example of monetary inflation (25 new bitcoins are added every 10 minutes), but at the same time we have price deflation.

iseewhatudidthar.jpg