Bitcoin Demand

by on March 21, 2013 at 10:37 am in Current Affairs, Economics | Permalink

The Market Monetarist points us to this graph. I wonder whether this is generalized demand or demand from Cypriots/Russians specifically.

http://marketmonetarist.files.wordpress.com/2013/03/cyprus-bitcoin.png

 

prior_approval March 21, 2013 at 10:48 am

Nice to see how painting the tape plays out with digital currency.

Russ R. March 21, 2013 at 11:01 am

While the supply of Bitcoins may be tightly regulated by a clever encryption system, what exactly precludes a competitor from adding another digital currency to the money supply?

JWatts March 21, 2013 at 12:06 pm

Nothing, but the inherent difficulty in getting the new currency off the ground. But on the other hand, what’s to stop any nation from creating a currency to displace the dollar, euro, etc?

I will say that the Cyprus bank account confiscation is the biggest reason I’ve heard for using bitcoin, outside of drug trafficking, etc. Perhaps, the Russian’s are starting to buy into BitCoin in a big way?

mulp March 21, 2013 at 3:55 pm

The are minting bitcoin to replace their $30 billion Euro deposits frozen in insolvent Cypress banks?

Or is their some bank that takes bitcoin deposits paying 4-5% interest that invests in high risk Euro bonds like the Cypress banks did?

If the depositors in the Cypress banks had simply stuffed their Euros in mattresses in Cypress vaction villas, they would not be losing a penny from the Cypress banks making bad loans.

gwern March 21, 2013 at 12:47 pm

Nothing. There are already multiple competitors to the original Bitcoin: Namecoin, Litecoin, Strongcoin, etc. They have seen little uptake because, with the exception of Namecoin (implements a domain name system!), they have little to distinguish themselves from the original Bitcoin and so why would you use them?

bitbutter March 21, 2013 at 5:27 pm

(Strongcoin is an online Bitcoin wallet)

Sigivald March 21, 2013 at 7:13 pm

Easy! Because they’re less far along their generation cycle, and you can generate more of them easier.

Since they’re all (AFAIK) deflationary like bitcoin, with a finite eventual supply (in Bitcoin’s case, 21 million), if you think they aren’t going to just die out (a huge if!) the sensible thing is to jump in now and run a spare computer 24/7 generating them…

(Full disclosure: I don’t expect any of them, including bitcoin, to have any lasting value, and have thus generated/acquired exactly zero of them.

Anyone who seriously thinks that Bitcoin will Take Over World Currency, well… should acquire several of them now, because each one will under that logic eventually be worth 1/21,000,000th of the entire world’s money.

That’s a pretty piece of change.)

Bill March 21, 2013 at 12:14 pm

I ran a correlation with the price of toilet paper/USD (Index March 15=100) and got the same graph. I wonder how many other spurious correlations there are out there in the real world.

JWatts March 21, 2013 at 12:19 pm

The price of toilet paper has gone up by 45% in the last week?

Bill March 21, 2013 at 12:21 pm

You haven’t bought toilet paper recently.

Bill March 21, 2013 at 12:25 pm

JWatts, You might want to look at this chart in the context of the last week “analysis” of this post showing bitcoin to USD index: http://bitcoincharts.com/charts/

Bill March 21, 2013 at 12:29 pm

JW, From the Bitcoin site:

“The value of Bitcoins is constantly fluctuating according to demand. As of June 2nd 2011, one Bitcoins was valued at $9.9 on a popular bitcoin exchange site. It was valued to be less than $1 just 6 months ago. This constant fluctuation will cause Bitcoin accepting sites to continually change prices. It will also cause a lot of confusion if a refund for a product is being made. For example, if a t shirt was initially bought for 1.5 BTC, and returned a week later, should 1.5 BTC be returned, even though the valuation has gone up, or should the new amount (calculated according to current valuation) be sent? Which currency should BTC tied to when comparing valuation? These are still important questions that the Bitcoin community still has no consensus over.”

dead serious March 21, 2013 at 5:06 pm

I have noticed that when you post, there is a very high probability that you will reply to your own posts at least once and a slightly less, but still high probability that you will reply to your reply.

Andrew-prime suffers from this same inability to consolidate his thoughts.

Bill March 21, 2013 at 6:16 pm

Dear dead,

I reply to comments, and I also find relevant information later, which is appended. I guess you prefer less information, or less support for an opinion, but, as they would say in the advertising profession, perhaps you are not the audience.

JWatts March 21, 2013 at 6:51 pm

I’m still wondering about the toilet paper going up 45% last week thing….

Bill March 21, 2013 at 7:51 pm

JW, apparently you didn’t get the joke. Fictional correlations are no different than phoney facts.

Brian Donohue March 21, 2013 at 10:07 pm

JWatts, apparently you didn’t get the joke. Bill made a dumb comment and won’t cop to it.

Bill March 22, 2013 at 9:16 am

Oh, Brian, you make such insightful comments and must have special knowledge about dumb comments.

Bill March 22, 2013 at 3:36 pm

Brian, In thinking about this further, I didn’t put your comment into the correct context: that what you think I think speaks much about you. So, if YOU think that I think that toilet paper increased in prices by 45% in a three month period, You must think that I thought that was a true statement, and that YOU discovered some secret that had to be revealed to others that toilet paper did not increase by 45%. OR, you can take my statement that spurious facts and spurious correlations are no different, because they lead to the same result. Which, leads me to conclude, you are either not so subtle to grasp a joke, nor so smart to believe that others, myself included, would believe that toilet paper increased by 45%.

Brian Donohue March 22, 2013 at 3:54 pm

Bill, you’re doing it again!

This is the Internet, not a court of law.

Look, I like the fact that you come around here with provocative and ‘contrarian to MR’ views. I think it’s healthy, and I always read your comments. I usually disagree with you, but it’s all good. C’est la vie!

Don’t be mad, let it go. The weekend is nigh.

Alex Godofsky March 21, 2013 at 1:28 pm

Is there any good reason to use a deceptive Y axis?

Rahul March 21, 2013 at 2:21 pm

+1.

Also if you see the trajectory of Bitcoin, there are ~4 spikes of this magnitude every month!

Nothing to see here.

Geoff Olynyk March 21, 2013 at 6:00 pm

Non-zero-scaled Y axes are endemic on this blog. I wish they would stop.

K書中心 March 21, 2013 at 6:34 pm

Only low-quality blogs or newspapers should require axes to start at 0 – for all their readers who are too lazy or incompetent to look at the axes before making inferences.

Silas Barta March 21, 2013 at 6:42 pm

Seriously? This argument again? If reading the words on an axis is enough to negate the entire effect of of otherwise misleading visualization, why follow any conventions? Why use a picture at all? Why use a consistent axis, as opposed to one with equal-spaced ticks labeled 1, 5, 6, 15, 300, 301?

It’s not about failing to read. It’s about the visualization not corresponding to the reality of the data. The increase plainly appears as relatively larger than it really is, defeating the very purpose of putting it in a picture.

If you don’t understand what a picture is supposed to add, please, just don’t use one. (Or offer your commentary on the matter.)

Jonpez2 March 22, 2013 at 2:56 am
Brian Donohue March 21, 2013 at 10:12 pm

Yeah. I got no problem with that y-axis. It might fool a third grader.

Now, about that awful x-axis labeling…

Patrik March 21, 2013 at 7:29 pm

To be fair, on a graph depicting exchange rates one might want to argue for a logarithmic axis. Then however zero disappears and the scaling would probably be best done in %ages.

J. Schmoe March 21, 2013 at 1:45 pm

A week and a half ago, I put a sell order in for my small Bitcoin deposit at $60, which I wasn’t expecting to see for a few months. They sold earlier this week, and as of a few minutes ago the price was bumping up against $80.

dead serious March 21, 2013 at 5:08 pm

Definitely a sign of a stable currency through which commerce can function.

np March 22, 2013 at 6:23 pm

De-sarcing. That’s just the exchange rate. Of course at this point, most people still evaluate by exchange rate.

Now the irony comes in the money supply. The most damn stable of them all that is ultimately deflationary. Have you looked at the Fed’s recently? Even though dollars are inflating over the years of course, in much shorter time periods, the supply (buying, monetizing, easing) is erratic.

nazgulnarsil March 21, 2013 at 3:07 pm

The finCEN guidance ruling that directly addresses bitcoin is probably a bigger influence. It bodes well for the Silicon Valley Bank partnership.

Johnny Pranke March 21, 2013 at 7:23 pm

I’ve seen a lot of casual dismissals over bitcoin but few hard numbers.

Here’s one: The M1 monetary base of bitcoins is $781,000,000. Less than a billion dollars. That’s utter chickenfeed in international currency terms. For what could very well be the digital version of gold, a non-fiat ‘flight to safety’ currency with a fixed stock, the value of bitcoins may still be incredibly low. Consider too that bitcoin is a global currency with few transaction costs in terms of acquisition (aside from the PITA of registering at exchanges if you acquire them with existing currencies, although I expect this issue to subside as they grow in popularity). We’ve already witnessed evidence of this with Cyprus. If bitcoin’s M1 became just 1% of the US Dollar, the exchange rate would be $2,247/BTC.

np March 22, 2013 at 6:28 pm

There is:
http://bgr.com/2013/03/18/bitcoin-analysis-cyprus-crisis-382103/?utm_source=trending-widget&utm_medium=home
about how Bitcoin-related apps started spiking on the Spanish iPhone market at the same time for geographic correlation.

So it might not have been from buying/conversion from Cyprus specifically (especially with banks closed or withdrawal limits), but its news could have caused some panic buying in other EU countries

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