My hypothesis for the bit coin is that the overall value of the coin will go down with the close of the online black market 'silk road'. Background and Predictions- The main use of the bit coin is to make anonymous transactions throughout the internet. It achieved this through proprietary encryption technology. ( I'm sure you understand this part better than I do) How ever the value of anything is determined by the demand of the market. Bit Coins got to a fairly high trading rate of about 1 coin: $120 us/80-90 eu. They were in such high demand and the supply is very scarce. They predict the coin to get to 21 million coins by 2100CE. Then a massive reset. I don't predict this to last that long. With the close of Silk Road, you create a void in the demand for bit coins. People have no where to spend them. Without demand, supply becomes flooded. People can't get rid of their coins cheap enough or at all. Think in terms of, if the king stopped taking sugarcane and wheat... What would happen to the people with the large farms? They'd have to stop harvesting and start destroying the crop. They can't sell it because there is no demand. How I could be wrong- On the flip side of this topic, the coins could become just that much more valuable. There is a void in the market for an underground economic sector. Someone could just as easily come along and do their own kind of silk road and charge a percentage. Or people see the value of anonymity after the 'bust' and jump in face first. I mean, they only caught one guy... Who was wrong in using his own personal e-mail for all silk road transactions. Variants- The only other mostly untraceable currency is cash. Cash is king. It's legal tender, mandated by the government. But what makes it better then the bit coin.... It's tangible. Can be used anywhere, where cash is accepted. It's still traceable in the sense that anyone can write down the serial numbers and make sure the banks know to flag that money. Closing Statements or TLDR;- I predict the price conversion of the bit coin to rapidly drop I give statements as to why the bit coin will most likely go down I give about alternatives to my theory, with the price going up Economics 101- Supply and Demand Economics 102- Value of Currency, Using supply and demand
Well the Silk Road site was nowhere near being the only place to spend Bitcoins. Their value took a big hit after it was closed but it is now almost up to where it was previously. More and more places are accepting Bitcoins every day, and with a limited amount of coin in the future, I predict the value will rise. However I could be wrong as people have bias and do make irrational decisions, influencing market trends. The study of economics is essentially the study of human behavior after all.
You are taking away a huge demand for the coin though. I mean SR was supposedly a $80mm a year business. Like I said on my counter situations, silk road possible could have received less activity in the past few months and people going to another site. They only caught one person and took down the site. Nothing more.
