DEVTOME.COM HOSTING COSTS HAVE BEGUN TO EXCEED 115$ MONTHLY. THE ADMINISTRATION IS NO LONGER ABLE TO HANDLE THE COST WITHOUT ASSISTANCE DUE TO THE RISING COST. THIS HAS BEEN OCCURRING FOR ALMOST A YEAR, BUT WE HAVE BEEN HANDLING IT FROM OUR OWN POCKETS. HOWEVER, WITH LITERALLY NO DONATIONS FOR THE PAST 2+ YEARS IT HAS DEPLETED THE BUDGET IN SHORT ORDER WITH THE INCREASE IN ACTIVITY ON THE SITE IN THE PAST 6 MONTHS. OUR CPU USAGE HAS BECOME TOO HIGH TO REMAIN ON A REASONABLE COSTING PLAN THAT WE COULD MAINTAIN. IF YOU WOULD LIKE TO SUPPORT THE DEVTOME PROJECT AND KEEP THE SITE UP/ALIVE PLEASE DONATE (EVEN IF ITS A SATOSHI) TO OUR DEVCOIN 1M4PCuMXvpWX6LHPkBEf3LJ2z1boZv4EQa OR OUR BTC WALLET 16eqEcqfw4zHUh2znvMcmRzGVwCn7CJLxR TO ALLOW US TO AFFORD THE HOSTING.

THE DEVCOIN AND DEVTOME PROJECTS ARE BOTH VERY IMPORTANT TO THE COMMUNITY. PLEASE CONTRIBUTE TO ITS FURTHER SUCCESS FOR ANOTHER 5 OR MORE YEARS!

Bitcoins Are Not Being Hoarded As Much As Originally Thought

In an article released by Coindesk, some pretty interesting information has come to light regarding Bitcoin and the spending habits of coin holders. The information deals with analyzing how long it takes more people to spend their coins after receiving them, which helps better understand the liquidity of the Bitcoin market we are dealing with on a day to day basis. Through this article, we are going to look at what was found out, as well as how it impacts the view of Bitcoin and what it means for crypto currencies as a whole.

Finding: Bitcoin Market is More Liquid Than Previously Believed

First off, let us look at the finding. What we learned is that the Bitcoin market is actually more liquid than we previously believed. What this means is that less coins are being held for speculation, and more are being bought for the purpose of using. Previously, the idea was that most coins were being held for speculation; especially being that Bitcoin is a deflationary currency, rather than inflationary. This information shows that it is simply not the case. But why does this matter?

Liquidity Means Market Stability

The easiest way to explain this is via market stability. Let us use a scenario to help illustrate it:

  • You have five people and five items. One person raises the price (asking) of their item by twice what it used to be. Now if the other four are selling theirs, the other 80% can still be bought at the normal price
  • You have five people and five items. One person raises their asking price and the others are all holding. Now the price goes up by twice, because there is no alternative; you either buy the item (that you presumably need) or you go without. There is no middle ground

In the first scenario, there is market stability because it would require the majority (or all) of the sellers to all raise their price in order to disrupt the scale. In the second, since there is only one item on the market anyways, that seller's price (whether it goes up or down) will impact the entire market. In other words, the more people (or, rather items) there are floating around, the more stable the price becomes because there are more choices and therefore it is more of a consensus about pricing, rather than a single person making all of the choices.

With Bitcoin, this works the same way. The more Bitcoins there are being transferred (bought and sold), the more liquid the market becomes. And the more liquid the market is, the more stability the pricing of the coins has.

Why Does Stability Matter?

You are probably wondering why the stability matters at this point. After all, a lot of speculative traders are making some serious money off Bitcoin and its fluctuations in price, right? Well, the reason it is so important is actually pretty simple: the idea behind Bitcoin is that it can be used as a transfer of wealth, or for purchasing power, rather than solely as a means for investment. For Bitcoin to continue to grow, money has to be put in to the system. For this to happen, there have to be more uses than just simply storing coins. On top of this, with the massive pushes towards getting more and more merchants on board with accepting Bitcoin for their services, it should be pretty clear that the coins are designed to be spent, rather than hoarded.

Now, this is where the stability starts to come in to play. If we wanted to use the coins as just a type of stock, we would want instability with the market (in that someone can earn significant money off of the fluctuations by making some great choices with regards to trading). This is not what we are going for, though, which means that stability is the key. To help better understand why this stability is so important, let us look at another scenario (this one from the point of view of someone going to the store to buy something).

  • Johnny needs $100 to buy a couple new games for his console. He jumps online and buys a single Bitcoin at the price of $100. He then goes to the store, and finds out that the price has gone down to $50. Now he can not afford the games he wanted

Price instability with Bitcoin goes both ways; the price can go up or it can go down. He could have easily gone to the store and had the price of Bitcoin go up to $200 each, where he would have just needed half of his new coin. But in the current scenario, he now has a problem: he can no longer afford the items he wants unless he holds his coin and hopes that the value pops back up to where it was.

From a shopper's point of view, this is a bad scenario. If I go to the store with $20, I should be able to buy $20 worth of items. I should not have to sit around worrying about whether or not that $20 will still be worth $20 by the time I get to the register. Adding in this fear is one of the things that holds crypto currencies back from being a full blown currency. At the current time, the prices fluctuate up and down so much that people are often afraid to get involved because it is still a little risky. By stabilizing the market, this risk is mostly removed, meaning that we can, for the most part, walk in to the store with a certain amount and still have that by the time we leave. Small fluctuations up and down will still probably happen, but they will be nothing like what we are experiencing today.

Bitcoin Activity (Trading, Buying and Selling) Findings

The chart at the top of this article shows the Bitcoin spending (through the various methods) rates through each year. If you follow along with it, what you will find is that in the beginning most of the coins were held. As time goes on, they are being increasingly more spent. In fact, as of 2013, it looks like about 85% or so (possibly more) were being spent either immediately or within a day of obtaining them!

What this chart is doing is helping show that Bitcoin is becoming more liquid. As more people are obtaining and then spending their coins, we move more towards it becoming a viable currency for use elsewhere. Now, with this said, the chart does have a pretty big flaw: it does not tell whether or not this includes things like pool payments that are sent out to people. This would technically be a “spend,” or rather transaction. There are other cases that could fall under the same category as well. In the beginning, most people solo mined, so the coins they got would go straight to an address and sit there until they spent it. With the higher hash rates and all the changes with computing, this is just not a good option for most people any more, and the transfer of coins has changed as a result. As such, it is pretty much impossible to tell for sure how many coins (or even a percentage) are being hoarded, versus those that are being moved around from person to person and not simply from wallet to wallet.

Conclusion

The article is definitely a great eye opener. We have been fighting the issue of liquidity for a long time now, and this at least gives hope that we are moving in the right direction. Bitcoins are meant to be used; to transfer wealth. Not simply to store it. The more people we can get on board with trading, buying and selling, the better off the entire Bitcoin system will be, and the other alternate crypto currencies will undoubtedly follow suit! So keep your coins flowing. Put them to use and help out the network!

Source

Shopping


QR Code
QR Code bitcoins_are_not_being_hoarded_as_much_as_originally_thought (generated for current page)
 

Advertise with Anonymous Ads