# How liquid are bitcoins and other crypto-currencies?

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1. Sep 20, 2017

### Stephen Tashi

How liquid are bitcoins and other crypto-currencies ? (i.e. How easy is it exchange them for normal currencies or for goods and services?)

For example, in the USA, a person with foreign coins (of the physical variety) can't go into a typical bank and exchange them for US currency. Is getting USA currency or other national currency in exchange for crypto-currency a big problem?

What merchants accept crypt-currency in exchange for goods? Do the people who honor crypto-currency form a subculture or sect of some sort?

2. Sep 25, 2017

### Greg Bernhardt

There are several websites that buy the bitcoins and then transfer the money into your bank account.

3. Sep 25, 2017

### mathman

4. Sep 26, 2017

Staff Emeritus
This really depends on whether you trying to convert one bitcoin or a million.

5. Oct 5, 2017

### MartTin

Will the bitcoin ever fall? How can bitcoin ensure monetary equilibrium? I want to invest money in Bitcoin and began studying the investment from this article - https://bitcoinbestbuy.com/. Can someone advise me something on the semblance of this article?

6. Oct 5, 2017

Staff Emeritus
Of course. It's fallen roughly 10% since Monday.

Not a smart idea if you can't answer the question "will it ever fall" by yourself.

7. Oct 5, 2017

### gleem

Bitcoins are somewhat mysterious to me. Having said that there are some characteristics that are fairly clear. One of the advantages, but a possible Achilles heel , is its transactional anonymity. Won't the Feds see it as a way to launder illegal money or avoid taxes and put some restrictions on its use?

Bitcoins are like gold, rare/limited, except bitcoin only exists as 0's and 1's in a computer or cloud but you can touch/hold gold. Supposedly it is impossible or very very unlikely that fraud can occur so what ever is transacted will be safe an accurate. But will it behave like gold. Really gold should be worth way more than it actually is. Today the total value of all the gold in the world is about $7.7 T at its current price. The total worth of the US is currently about$85 T. So why is gold so cheap? Will bitcoins follow gold and not live up to its "potential" and sucker "investors" to bid it up until it is realized that their is nothing but electrical signals. Bitcoins are a true fiat currency. Will bitcoin help raise the price of gold?

8. Oct 6, 2017

Staff Emeritus
Huh? You are surely not arguing that the value of gold should equal the net worth of the world. That would mean that nothing besides gold has any value. What are you trying to say?

9. Oct 6, 2017

### 256bits

So does the account in your bank - it is just 1's and 0's. No bank has enough 'hard cash' on hand to cover all deposits.
Pay by credit card, debit card, or any other electronic means and no actual paper money or coin exchanges hands.
But as you have referenced or implied, 'legitimate' transactions leave a trail that can be investigated.

Bitcoin is different in that there is no central 'bank' that makes a record of who owns what amount of bitcoin.
What ever is in your bitcoin wallet is what you have, and like anything else these days, only you should be the only one to be able to access your wallet.

10. Oct 6, 2017

### FactChecker

It's also different because no country would use their army, their legal system, their international agreements, or their financial institutions to back it up.

Fans of bitcoins like it because it is not associated with or manipulated by the policies of any country. But the down side of that is that no country backs it.

Last edited: Oct 6, 2017
11. Oct 7, 2017

### gleem

( Note: I have no expertise or formal education in economics or monetary systems and any statements and conclusions regarding these topics are due to my own limited knowledge (and or misconceptions) and are presented as items that I seek more understanding or explanations ).

No I wasn't thinking of that, just that the total value of US asset compared to the world gold supply (and the US supply is only (0.4T) seems out of balance considering what gold means. Gold is used for representing the value of things transferred to others and we will always possess things other than gold. It stores previously created value. But value of assets is increasing faster than the supply of gold. The world GDP has been increasing more than 3% per year for decades The gold supply on the other hand has been increasing only about 1.7 % annually. One would also think that the amount of value extracted from these assets as they are transferred and stored will also be increasing faster than the gold supply thus one would see a need for more gold or increase its value. On top of that gold is actually being consumed. It is estimated that 17% of new gold is used in industry is such a way that it cannot be recycled and is therefore lost. The total commercial bank deposits in the US is $12T unmaterialized, value paper 0's and 1's. Considering the US government only hold$0.4T in gold about 3 cents on the dollar there is a lot of faith in the dollar and that's OK as long as the world does not develop doubts in the US government or its economy.

Only in the sense that people think the bitcoin value like the tulip bulb will increase dramatically but that is true of most speculative IPO's look at ROKU recently

The bitcoin with its block chain protocol has some built in positive properties as a currency but it is like a stock and it fluctuates sometimes drastically from day to day (high volatility). It viability as a currency will depend on belief in its stability but its interest is in its volatility. Whether or not it was introduced as a get rich scheme we may never know but that is what it is being exploited as. I do not understand how merchants at this point in time can risk taking it as a currency with up to 30% fluctuations in value in short periods of time unless they too are also speculators much like tulip brokers who bought bulbs and just stored them until the price increased to the point that they made their targeted profit.

True, but there is a paper trail to a tangible? asset whose buying power, value is assured by a government. A bitcoin is what? a promise or hope by an unknown entity of what? that some day we will use it as a currency whose value is determined by who? a bunch of gamblers? It is said that the block chain protocol (probably bitcoins best characteristic) is secure. Really? My feeling is If it is on a computer it is hackable..

12. Oct 7, 2017

### Staff: Mentor

@gleem: Why do you think gold is special in any way? What about all the other metals?
I never did any transaction where gold would have been involved in any way.

In the distant past currencies were linked to gold or other metals, but that stopped long ago.

13. Oct 7, 2017

### 256bits

Good one.
I had never actually thought of that particular aspect of Bitcoin volatility

14. Oct 7, 2017

### mathman

Bitcoin price depends entirely on people's image of it. This is in contrast to money, which depends on the credit of the country issuing it, while stocks etc. have a price depending on the underlying value of the assets.

15. Oct 7, 2017

### gleem

Why do most countries acquire and hold gold ? I think It is universally considered valuable. Gold is still considered providing tangible value to a country when their currency becomes weak. Currently China and Russia are buying gold at an unprecedented rate. If other countries balk at taking Yens or Rubles for trade or debt they will take gold. At the end of WWII Germany had to buy everything with gold. to bootstrap their economy. Gold is not irrelevant It seems to me there must be some universal agreed upon currency that at least countries can use to carry out financial transactions when their economy becomes suspect. Would anybody today accept a Venezuela Bolivar (8000 ≅ 1USD) for anything? Luckily it has about \$10.5B in gold.

16. Oct 7, 2017

### gleem

I don't think it matters how much stuff a company has that enters into its market price. New stocks are valued on their actual demonstrated growth or even perceived growth potential even as they loose money or go into debt. The value of underlying assets is what you would get if you sold all assets on the open.market which would be useful in bankruptcy. Companies in general are valued for there return on investment real, perceived or anticipated.

17. Oct 7, 2017

### FactChecker

Although when you look at stock prices versus a business's rate of return, it seems like most of the price is also based on people's image of it. It's almost a pyramid scheme.

18. Oct 8, 2017

### Stephen Tashi

What's the general idea behind "mining" bitcoins. Is it simply to guess a string of data that makes a valid bitcoin that nobody else has guessed before? Or are bitcoins issued as a kind of wage for doing computational work for the bitcoin "community" ?

19. Oct 8, 2017

### Staff: Mentor

The calculations don't have a practical application. They are just there to be difficult.

20. Oct 8, 2017

### Stephen Tashi

So a bitcoin "miner's" computer does some difficult calculation that produce a potentially valid string of data for a bitcoin and then he checks with computers in the community to see if this bitcoin has already been created?

21. Oct 8, 2017

### gleem

As I understand it It's an incentive to carry out the process of validating a transaction of a transfer of bitcoins. Since the validation is not given to any one particular it is toss out onto the web as "who wants to do this" and if you are successful you will earn a bitcoin. So the so called miners get the benefit of the value appreciation of the bitcoin only risking a certain amount of effort.

Bitcoin buyers,on the other hand , are like currency speculators and risk real money . But bitcoin buyers unlike currency speculators have no rational way, as I see it, how to predict the appreciation of the value of the bitcoin. Example, if a country is heading for some economic or political uncertainly a citizen of the country might acquire US dollars, Euros or gold as a hedge against possible inflation of his currency.

22. Oct 8, 2017

### Stephen Tashi

The mechanics of sending a internet message to "anyone listening" would be interesting. Can that actually be done? I'd think that ISP providers would block that type of packet as spam.

23. Oct 8, 2017

### FactChecker

New bitcoins are entered into a blockchain public ledger. Anyone can access it and examine it.

24. Oct 8, 2017

### Stephen Tashi

How is a "public ledger" implemented in a non-centralized way? Does it have a fixed IP address?

25. Oct 8, 2017