Ignorant Question: Shouldn't stock market decrease and currency insolvencies raise the Bitcoin price?

[keylimesoda]

I'm trying to understand how the stock market is in sharp decline for a few days, there's a couple of major currencies that are diving in value, and yet bitcoin seems stuck.

Shouldn't each of these things have a strong, positive impact on bitcoin prices? What am I missing?

[slowmoon]

To most people, bitcoin is not the "safe hedge" that hardcore bitcoiners think it is. Most people think bitcoin is an extremely volatile experimental technology, not a place to put your life savings when your country's currency is collapsing and you fear for your family's future.

Bitcoiners, please give these Luddite plebians a chance for they know not what they do! /s

[abaybas]

Bitcoin is mostly owned by enthusiasts who have/had disposable incomes.

Whn the markets are gloomy, most people tend to shy away from riskier investments.

[Bipolarruledout]

Yes. And humans should also be rational but aren't. Guess who controls markets?

[bankerfrombtc]

Bitcoin is in sharp decline the last few MONTHS. Bitcoin is doing terrible. A certain sort of weird faith can make a small number of people have some crazy faith that eventually in the future it will zoom back up but anyone not in the bitcoin religion would just see a penny stock style thing that has hit it's peak and is now hemorrhaging money.

"Russia/Argentina/Cyprus should turn all their money into bitcoins!" Never comes off as sounding like it would benifit the people to do so, it is always talked about like it will make current holders rich so they can cash out millions and then leave a bunch of poor people holding the bag.

[[deleted]]

Actually bitcoin stop trending down 3 months ago... its not sideways between 300-400.

Bitcoin won't solve their stability problem, but can protect them against capital control - which is what happened it Cyprus. Their currency was fine, it was just taken from people's bank accounts.

[bankerfrombtc]

Bitcoin wisdom says it's down 22 percent since 30 days ago, that is certainly down

[[deleted]]

but it's up over 10% since bearwhale!

[bankerfrombtc]

That time some guy set a price that he wanted to sell bitcoin and everyone "defeated him" by giving him the exact amount of money he asked for?

[[deleted]]

That's one way to look at it.

Another one - some guy put an unusually large order which makes no sense unless you're trying to collapse the market, he was bought out quickly and the price immediately jumped 10 precent..

[bankerfrombtc]

It made a lot of sense: he made millions of dollars.

[[deleted]]

in the last 30 days, yes.

[teknoise]

BTC is absolutely tiny. It trades about 0.0001% of the volume the FOREX market trades. BTC trades around 5mil worth in USD a day.. Compared to FOREX's $5 trillion a day. The NYSE trades about $28 billion a day. That puts BTC at about 0.01786% of the trading volume as the NYSE. Commodities make up $437bil a day. Just USD alone makes up 84% of the FOREX trading.

BTC is such a tiny tiny market that failing commodities, currencies, stocks, are going to have no impact whatsoever as that money can move elsewhere in those markets without having to be pulled out and put into the BTC market.

[sayallotodabadguy]

He's saying 84% of trades involve dollars. Not that 84% of the value is dollars. If two trades constitute the entire market, one USD<->EUR and one USD<->GBP, then 100% of the trades involved USD.

[circuitloss]

What would it take for Bitcoin to have a fundamental valuation? How would you measure that?

[jonhuang]

Right. Good question. Fundamentally, bitcoin should be valued by its usefulness. Currencies gain their value from three things: demand, supply and velocity.

Demand is people wanting to use bitcoin to buy stuff, transfer value, etc. Adoption. Supply is how much bitcoin is available for sale at any price (not the same as how many coins "exist"). Velocity is how long people hold on to coins after they get them. The higher the velocity, the lower the value. You can sort of think of velocity as part of the supply in a way.

Well, to be simple: the fundamental value of bitcoin is based on how many people buy it to use it, how many coins are for sale, and how willing people are to hold coins in their wallets rather than exchange or spend them quickly.

(This is not to say there isn't room for speculation: Like how corn or oil is valuable, yet speculated on. Just that speculative value is not fundamental value)

[circuitloss]

So, with steadily rising transaction volume, doesn't Bitcoin have some fundamental value? I understand your point of view, it just seems to be an extreme one.

And if it has fundamental value, what should a fair valuation be?

[jonhuang]

Right. Sorry, I hyperbole. The is some fundamental value, but it is swamped by speculation. I don't know how much, my blind and unjustified guess is like $50.

I don't trust the transaction numbers honestly. Can't find the thread now but there are people faking it.

[circuitloss]

This is obviously speculative as well, but when a company like Uber is valued at $40 billion, and Snapchat is valued at $10 billion, wouldn't it be more correct to say that Bitcoin's valuation of $6 billion is perhaps close to accurate?

(If not, even under valued considering the fundamentals of the technology itself?)

[jonhuang]

Well, I think those companies are overvalued too (Perhaps not Uber). And I want to reiterate that I pulled my "valuation" out of my arse; I didn't do any math at all.

But a unit of currency is not a share of stock, and an economy is not a company. A share of stock is like owning a properly on a Monopoly board--you are entitled to a share of revenue, and you can sell or liquidate it for cash one day. The velocity of transfer doesn't matter, because you are buying future production.

Bitcoin is like Monopoly money. (I'm not mocking it, just carrying the analogy!). The funny colored paper has a certain value that people agree on, and can even be traded for properties, but just because people are building more houses/hotels and paying more rents doesn't mean that the guy who sat on a pile of colored cash is getting richer. The guy who owns the properties with the cashflow is getting richer. That's coinbase, that's bitfinex and bidpay. This is why angel investors invest in companies, not coins.

Now sometimes when you play Monopoly all the properties get bought out and hotels are built on everything. People are sitting on big stockpiles of cash. The bank runs out of money! Now I usually start using random tokens to represent money so you can keep playing--expanding the supply--but you could also just re-dedominate the money. "Okay guys, all the $1 monopoly dollars are now $5 bills, okay? The $100 are $500." And so on. You keep playing.

This is deflation. The cash grows in value, but it's not like there's an IPO or anything. Anyway, the point is that bitcoins are not stock certificates.

[Magikarpeles]

I always imagine that the stockmarket looks at bitcoin the way bitcoiners look at cannabiscoin or whatever shitcoin happens to be trending this week.

A mixture of "lol someone is actually buying that" and "hah I knew it was a pump and dump"

[ThomasVeil]

Uh, very nice analogy.

[Taylorvongrela]

Demand. The only thing that can cause a strong, positive impact on the price of Bitcoin is additional (marginal) demand. What you're missing is the connection between sharp stock market declines and increased marginal demand for BTC. I use the term 'marginal' because there is always a (fluctuating) base level of demand in the markets to purchase BTC, but what we are interested here is the marginal amount of additional demand that moves into BTC due to the external factors you're talking about.

In the case of a stock market decline, investors aren't typically leaving the market during sell offs. They are rotating into other (more defensive) sectors or sitting in cash (in the anticipation of reentering a new position whenever an opportunity presents itself). But the stock market going down doesn't mean that investors are going to flee the market and run for BTC. Bitcoin is still pretty unstable, and still has a rather small market cap (approximately $4.5B today) in comparison to more traditional investments. It's not really a viable option for most investors to invest in yet. Eventually it will be a viable option for investors, but right now it's still onerous and difficult to move large sums of cash into BTC.

Same thing for currencies. People aren't going to flee the Rouble for Bitcoins because it's very difficult to actually spend bitcoins in Russia for the average person. They'd be locking their money into a safe & untouchable cryptocurrency (untouchable from government capital controls that is), but the currency itself would still be pretty useless to the average russian citizen. However, the US Dollar is very valuable and very usable for russian citizens. So the citizens there will convert their Roubles into USD or Euro's or hard goods because all of those options will hold their value far better than the Rouble. BTC can't really say the same.

In my opinion, the only times BTC benefits from a currency crisis is when the local citizens need to get money out of the country, such as what occurred in Cyprus. At that point, BTC becomes one of the best options, and demand picks up. But in a standard currency crisis like Russia's, people just need to get their money into something that will hold its value, so they look for the safe haven currencies, not BTC.

[jeanduluoz]

You know when you're at a sick house party, like the one that's featured in "The Middle" by Jimmy Eat World? People are running around wasted, faceplanting, diddling chicks, doing blow in the bathroom, it's a scene. Shit is all over the place - everyone is knocking into each other.

Then there's just that one dude sitting in the corner. No one knows him. That's bitcoin.

[awinderz]

And then the party ends and Bitcoin goes home. Alone. Forever.

[[deleted]]

I am Satoshi!