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58

If you bought a bar of gold at $1200 / ounce, then the price of the gold drops to $600 / ounce, you wouldn't actually lose any money at all unless you decided to sell your gold at that time. However, if you wait until the price of gold rises to $1800 / ounce, then sell it, you will gain money. The key is an ounce of gold is still an ounce of gold, ...


44

Although individual bitcoins enter the Bitcoin economy as miners are rewarded for processing transactions, it's much more helpful to think of all 21 million bitcoins as having been created when Satoshi Nakamoto defined the Bitcoin protocol and launched the Bitcoin network in 2009. The reason for this is that the Bitcoin protocol specifically defines and ...


28

If you bought one bitcoin and the price goes down, you still have one bitcoin. If the price goes up...still one bitcoin. This is just like everything else, including groceries, gasoline, gold, stock certificates, etc... Measurements of value in fiat (such as dollars) does not affect the amount something you own, only the price at which you will be able to ...


25

The Scenario is confused, because it assumes that there is only one side to a trade. The scenario assumes that the money goes "into the Bitcoin economy" when people buy bitcoins. This is confusing, because it sounds as if there were only one side to the trade. You will find that the scenario doesn’t imply Bitcoin to be a Ponzi scheme, once you take a closer ...


14

That is basically it. They have value because they are scarce, fungible (one Bitcoin is as good as another), easily transferred, and easily verified. The only other component they need to have value is a general agreement that they will be used as a medium of exchange or a prevailing belief that they will be in the future. It is the variation in these two ...


13

The price for a bitcoin, e.g. for trading with other currencies, derives as usual from the interaction of supply and demand. The supply of bitcoins increases over time, as determined by the rules in the software which is run by the majority of miners, and increases regularly over time, in decreasing increments. It can also decrease when people lose access ...


13

Bitcoin Charts currently have charts of up to a year in length, as well as "all data" charts. Example 360 days: http://bitcoincharts.com/charts/mtgoxUSD#rg360zvztgSzm1g10zm2g25


13

tl;dr- This is called a capital loss. You're said to realize the capital loss if you sell the Bitcoins at the lower price, such that you lost money due to having bought/sold them. However, note that this isn't legal advice and I'm unsure about what the current legal statutes are surrounding Bitcoin. Bitcoin's a capital asset (at least conceptually; dunno ...


12

Since the bot exists, and the people who wrote it presumably wish it to perform every transaction it performs, it reflects real supply and real demand. Why would you want to stop it? There is nothing inherently good about a high price. Personally, I think the drop in value was due to the bursting of a speculative bubble. The price was previously kept high ...


11

The value comes from their scarcity. To use something as a medium of exchange, it only has to have a certain set of properties. Bitcoins have these properties, so they can be used as a medium of exchange. They are fungible. That is, 10 bitcoins is 10 bitcoins. This makes Bitcoins more useful as a medium of exchange than, say, apples, which vary widely in ...


11

Satoshi created a system that: Allowed users to trust transactions without having to trust any single entity. Opened it up so that anyone could participate and exchange computation power for Bitcoins. Is designing with a fixed size (21 million Bitcoins), he created an incentive for users to get involved early while Bitcoins are relatively cheap to generate; ...


11

The answer is not unique to bitcoin. It would be the same if you're dealing with (non-crypto) foreign currency, stock, a stock derivative or commodity or commodity futures. When you buy something like the above, you are giving up your "real money" (fiat currency) to take possession of said commodity/stock/bitcoin/etc (let's call these assets in general). ...


10

Economic theory tells us the price would rise. It would have a deflaitonary effect on bitcoin economy. However because bitcoins are so easily divisible it would not impact the ability for the network to function. If 90% of bitcoins were lost/destroyed that would leave 2.1 million "whole" bitcoins in circulation. This wouldn't be an issue because ...


10

This more of a question about excel than it is actually about Bitcoin. But the answer is actually pretty easy. The first thing is that the data that you want to import from the web may not be easily isolated, so you might have to import much more data than you want into a second excel sheet, then link the cell with the data you are interested to a cell in ...


10

Bitcoins are no different from any other commodity in this regard. We say that the price of a car is $45,000, but that doesn't guarantee that you can sell one for $45,000 unless you can find someone willing to buy one for $45,000. When we say some particular number is the price, we mean that's basically the number that buyers and sellers both agree that it ...


9

The value of a Satoshi is fixed. The key word is "currently" (smallest currently possible). If the divisibility is ever increased, a Satoshi will still be exactly 0.00000001 BTC, even though there exists unit representing an even smaller amount. There would need to be new names for these new denominations that are even smaller than a Satoshi, but dSatoshi ...


9

Yes, you lose a quantity of your money, at the time you gave it away in exchange for the bitcoin you received. Subsequent changes in the exchange rate only vary the hypothetical value of what you would get if you wanted to trade back.


8

The only way to fix an exchange rate is to constantly trade at this rate. This requires unlimited funds. So assume you want to peg BTC against CHF as in your example. For simplicity, we aim at 1 BTC == 1 CHF. Here's a simple recipe. Have unlimited Bitcoin and unlimited CHF. Find a Bitcoin exchange. Offer to buy an unlimited amount of Bitcoin for 1 CHF/BTC....


8

I've heard this mentioned so many times by so many different people- but the only real cause is supply and demand. If a "bot", or "manipulator", or whoever you want to call it, was selling off so many coins that it has the effect of lowering the price... then there is not enough demand to satisfy the supply, and so the price drops.


8

Blockchain.info reckons the network used 156.51 megawatt hours of electricity in the last 24 hours. This random physics page I googled up reckons a car driving at 40mph takes 100kW (so, 2.4 MWh in 24 hours). So by these (very) rough figures, running the Bitcoin network takes about as much energy as driving 65 cars. How many vehicles are used in the ...


8

This is really asking about basic trading economics: if I have some new product X, what price does it have? I can set a price and see if anyone buys it. If not, I might lower the price or auction it to see what someone might pay for it. That is the starting value, but it doesn't really mean much as it hasn't been field-tested (so to speak). If others think ...


7

You could fix the minimal value of Bitcoin if you had some money and you wouldstate: "I have X$, I will buy each and every Bitcoin you offer me at the rate of X/2100000$". The only problem is that people need to trust you and you have to have enough money. So, if you get en established company (for example, Google) to secure the funds you can fix the minimum ...


7

Bitcoin is a decentralized digital currency. It is meant to be resistant to corruption and external control. That is the reason it was created. Bitcoin achieves this only through the approach where consensus of the ledger is achieved by performing work. Bitcoin is vulnerable -- this consensus mechanism can be blocked by anyone with 51% of the mining ...


7

There are really only two things driving the increase in price you are talking about. Supply and Demand Greed and Fear Supply and demand is simple, there is a virtuous cycle at work here: Increasing demand drives price increase due to limited supply Increasing price drives increasing demand as knowledge spreads in the media Repeat Greed and Fear are ...


7

A Ponzi scheme is characterised as follows (this is according to Wikipedia, rather than for example the US Department of Justice, which would focus more on the criminal culpability in its definition): A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital ...


6

The value of Bitcoins will fluctuate against the dollar -- for a number of reasons, including the price rising as the result of speculation or from demand for the currency. The price can and has dropped -- for various reasons as well. If you want to hold bitcoins, then you expose yourself to those fluctuations. If you simply want to use bitcoins for ...


6

As famous as it is, I believe Silk Road isn't the reason for Bitcoin's existence or its success. There are plenty of private individuals who value Bitcoin for international money exchange, its low cost trading capability, its irreversability, its lack of a central authority and its upper limit on the number of bitcoins. If you analysed the transactions ...


6

If the global network difficulty is D and the difficulty of shares in the pool is d, then the probability that a share will lead to a valid block is d/D. The reward in this case is B, so the average reward per share is B*(d/D). If the operator's average fee is f (so for example f=0.01 means 1% fee), the average reward miners get per share submitted is (1-f) *...


6

Whether it fluctuates or not depends on how you express value. If you happen to be one of them American folks, who use dollars to express value, then a fixed amount of money in other currencies (such as euros or bitcoins) will fluctuate. But similarly, a $10 dollar bill will fluctuate in value, if you express value in euros or bitcoins (basically, that is ...


5

Because there is no guarantee that bitcoin will be in demand in the future. Here's an example, in a recent Gawker article they put "(RIP)" when naming Bitcoin .. as if it had died. http://www.gizmodo.com.au/2011/09/is-digital-money-the-new-way-to-buy-drugs Of course, the existing $35 million or so valuation of the currency come from those speculating that ...


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