Who decides the price of Bitcoin?

[Anonymous]

I am new to the world of bitcoins and cryptocurrency and this question hit my mind recently.

Bitcoins are gaining popularity at a faster pace but will anybody make it clear to me that who decides the price of these bitcoins?

[Richard]

Essentially the gamblers do. If you decide that you want say a nibble coin for £100 that is your offer price, if someone accepts the bid that becomes the spot price for a nibble coin. However if demand rises you may well find that the prices offered also rise in this respect it is like any other item. The problem is that the nibble coin is not backed by anything that can be used to justify its value, so if demand slumps than its price will also fall. today you offer £100, tomorrow you might get back 10p or nothing, or a lot more. So it is with all of these offerings. They are a gamble and sometimes gambles pay off if a strong enough reason emerges for the items in question to continue their existence, the nibble coin does not fit that profile!

Others will suggest I am being too hard on the concept, it is for you to listen to as many inputs as you feel able to collect and process. Then you must decide what to do with your money, I cannot, nor will not try to colour your view.

[The Duke]

The buyer do. It’s a simple supply and demand thing, as supply is restricted, the buyers dictated the price. Same as share prices.

Now if you held a ton of coins, and you dropped them all on the market at once you could crash the prices. Same as a nations currancy (see George soros black Wednesday for example).

It’s basically betting. I missed the ship on bit coin to get in early, decided to fold under mms names instead of rendering a few coins.in those days 2009, you got handed either a 100 or a thousand coins just for signing up and completing one hash. The coin then was worth about a tenth of a pence. Now about £10k a coin. ?

[tadka]

I’m not sure your answers are correct. The prices are based on demand and supply but I doubt that we as buyers/sellers have a say in it. I haven’t research into it yet but so far it seems that there are what they call “market makers” who decide how much should the price of a share/stock be. Maybe it’s them who decide on the prices of the altcoins too. Sometimes there is a big gap in the price between the closing and the opening. I think if they anticipate a big demand they start with higher price. If they anticipate a sell-off they lower the price for the opening of the market. But I could be wrong.

[The Duke]

It was the simplified version. It comes down to what the buyer is willing to pay at that current moment.

[Ed P]

tadka wrote:

I doubt that we as buyers/sellers have a say in it.

If you are saying that the average individual punter is not a market mover then you are absolutely correct. If though you were moving many thousands of them then that should affect the prices. For example if you were an Albanian Mafia Don then you probably could have a major influence! link

The only way that punters will move markets is through herd panic or playing ‘follow my leader’.

[The Duke]

I think my george soros example was better ed

[Ed P]

I think your example of market movers is better overall, but specifically for Bitcoins imo the Mafia case is probably more realistic. Remember what happened to bitcoin prices when the Cypriot banking system went into meltdown and hot money started to flee Cyprus and re-emerged in New York and London. Imo bitcoins were the major unrtraceable transportation vehicle.

“Bitcoin prices more than doubled between July 1 and August 18, 2012. Then in a matter of minutes, the price of Bitcoins fell from $15.25 to $10.50. The decline continued over the next two days, reaching a low of about $7.50. The price didn’t rise above $15 again until the new year.”

(If you have wandered around Cyprus during the last thirty years you would have to be a complete non-linguist not to have heard all the Russian voices pre 2013, and most were not oligarchs!).

[Spedley]

I’ve been dabbling a bit and the only way to make money is buy and sell.  There was a large boom where you couldn’t fail to make money but now you need to trade regularly, i.e. several transactions per day.

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[Richard]

I pretty much agree with you @Speedly, though for that to be possible you do need a dynamic market and that can be where a market maker does something valuable. You will only buy or sell if the market is moving your way and by publishing a price the market maker creates a more open market place where, in theory anyone can chose to buy or sell. Some people have to sell at a point in time, a tax bill is due, there is something that needs replacing or fixing, they are distress sellers who need the cash now. By creating a moving market the market maker makes that sale possible. If you @Speedly wanted to buy or sell something but did not want the commission or hassle of a market maker you could chose to do so by dealing directly with the other party. Since these are not securities you do not need any form of official sale, though if you make too much money HMRC might want a share of the loot.

There is no real reason to either buy or sell such ‘intangible goods’ the market runs only on sentiment, if the sentiment is favourable, the price will rise partially to garner headlines and hopefully attract buyers. If sentiment falls and becomes negative, the price will fall, and may fall sharply leaving holders, including market makers,with over priced or potentially worthless stock. History is littered with examples, The South Sea Bubble, The Black Tulip, the Wall Street Crash, etc., in most cases, ordinary customers lead the rout. This is why, ultimately it is the customers who set the market, even if the sentiment that leads them by the nose is partially generated by market movers including those infamous Twitter bods, more used to pushing dodgy diets or expensive cosmetics.

The most dangerous market price mover of the lot is a rumour; that then causes a stampede, the old shout of fire in a crowded place, is a good example.

[RSB]

I have deleated this user but left the thread open.

Another Indian spammer that got through.

Seem to be getting a lot of this the past two days.

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