Not sure how you can accept Bitcoins as a payment form, unless you tie it expressly to another currency. With this much fluctuation, the only other option would be an auction.
I think this makes it likely speculation is the only driving force for the value of a bitcoin at the moment, which doesn't bode well for something that wants to be a currency.
Edit: To be clear, what I mean is that normally we sell things for say, $2 and rarely adjust the price (a few times a year is unusual, usually it isn't even that quickly). You would need to constantly adjust your selling price in Bitcoins, making it very hard to use as an actual currency when the perceived value goes up this quickly.
Gasoline is one of the few things we buy that fluctuates pretty rapidly, and when it fluctuates people that own gas stations are often squeezed, sure they have a tank of gas they bought for say $3/gallon, but they need to schedule the next tank at $3.25/gallon, so all the profit from the current tank of gas is going to the next fill up. And when the price of gas drops, if they can't sell their $3.25/gallon gas quickly enough, they take a loss. For small stations operating on thin margins, this can wreck a month of profits.
There are several factors driving the bitcoin prices up, including people from European countries converting their money to bitcoin because it makes it harder to seize.
But since the beginning of the year bitcoin has doubled nearly 3 times, and this past month has seen additional acceleration. Bitcoin has been in the news a but I don't see any legitamate reason for the dramatic spikes of the past few weeks... except for speculaiton.
I posted this because I think that today's extraordinary spike is preceeding a crash of the market. At some point, all of the serious speculators will have put all their money into the coin, and they will be looking to cash out. A huge spike like this would seem like an optimal time to cash out.
And if there aren't enough people to buy the coins, the market will plummet.
Bitcoin has been succesful recently because the value has continued to go up. When the price takes a hit, people will lost confidence, and non-speculators will also start to sell. I don't know how hard the initial hit will be, but the last time that Bitcoin started losing value, it spent almost 3 months declining.
I believe that the same thing will happen again, and bitcoin will (after the initial hit) decline for several months before starting to make its deflationary recovery.
> There are several factors driving the bitcoin prices up, including people from European countries converting their money to bitcoin because it makes it harder to seize.
I doubt many people are stupid enough to trust Bitcoin with their savings.
The thing with Bitcoin is that identities are easily made, and transactions are hard to track. Nothing is stopping you from creating a whole load of transactions between addresses you own, essentially creating a lot of traffic and faking interest in the currency. I'm sure there are lots of Bitcoin bots out there propping up prices, run by speculators who bought low.
> At some point, all of the serious speculators will have put all their money into the coin, and they will be looking to cash out.
You are assuming that the price rise is due to short term speculators looking to make a quick buck. I think a lot more people are buying into the philosophy, politics, and revolutionary technology and won't be so quick to sell.
I think that most people buying know fairly well that it can crash, so they dont acquire more than they are willing to loose completely. So in the event of a crash, they are not necessarily going to sell, they might just keep them around in the hope that it will go up later.
I totally agree that the fluctuations are no good for a currency. People like to say that bitcoin is a currency, but it really could be a lot more than that. Even with wild volatility, it can still work great as an international funds transfer system (assuming the conversions to/from national currencies are smooth enough), and it can still take on Visa, Mastercard and paypal at the online payments game. It also acts as a hedge against bank account confiscation, as a speculative bet against inflationary monetary policy, and as a direct (although more risky) competitor to precious metals. Moderate success in any one of those categories would be huge for bitcoin. Acting as an everyday currency can come later.
You generally don't get taxed for holding personal goods, except real estate, at least in the US. I'm not a tax specialist, but it seems likely you would only get taxed on bitcoin transactions, ie: if you sell bitcoins for U.S. $ you would get taxed on the profit, much like a stock.
If you mean use bitcoins to avoid any taxation at all, well, I guess you better have a bunch of lawyers lined up.
Everything is always valued in relation to something else, including bitcoin. USD/BTC is about $120.xx right now, right?
Dollars are valued against Euros, barrels of oil, rents and a six pack of beer. The same applies to everything else. When you talk about what it is worth it is always in terms of some quantity of something else.
What people will learn a few years from now is that almost every part of the human experience is a speculation; death and taxes excepted, of course!
I think this makes it likely speculation is the only driving force for the value of a bitcoin at the moment, which doesn't bode well for something that wants to be a currency.
Edit: To be clear, what I mean is that normally we sell things for say, $2 and rarely adjust the price (a few times a year is unusual, usually it isn't even that quickly). You would need to constantly adjust your selling price in Bitcoins, making it very hard to use as an actual currency when the perceived value goes up this quickly.
Gasoline is one of the few things we buy that fluctuates pretty rapidly, and when it fluctuates people that own gas stations are often squeezed, sure they have a tank of gas they bought for say $3/gallon, but they need to schedule the next tank at $3.25/gallon, so all the profit from the current tank of gas is going to the next fill up. And when the price of gas drops, if they can't sell their $3.25/gallon gas quickly enough, they take a loss. For small stations operating on thin margins, this can wreck a month of profits.