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Comment by stevewilhelm | Hacker News Reader

In any financial exchange, both parties, the buyer and seller, need to come to agreement on a price.

Given the fact that current BTC to USD exchange volume is fairly small, it wouldn't take that many large global goods and service providers pegging their BTC/USD exchange rate to cause the speculation market to collapse.

Those that recently bought their Bitcoins at $900 would sell below the current high price to realize their gain and avoid a potential loss, then those who bought at $800 would follow suit, and so on.

In very short order, Bitcoins could be trading in single digits.

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They couldn't. If you pegged the price to one, there wouldn't be enough units for everyone to buy anything they want. Remember that there are only 12 million of them, and only ~20 million will be ever available. Tying their value to one would mean that the size of whole economy would be only 20 million USD, which is pocket money on a global scale.

what gain?

you are proposing taking for example a $100usb product and selling it for 100btc... which at current market value is the equivalent of over pricing it to $100,000usd. Who would buy that when they could pay $100usd for it instead or convert 1btc and functionally pay 0.1btc for it instead of 100btc. What global goods providers would mark up their wares 1000x and who in their right mind would spend anything on that.

Sure, if BTC was worth > $1usd and you were selling them at 1:1 everyone would leap to do that because now they are GAINING by spending their BTC with you.

But your proposal means they loose 1000%. I don't understand what motivates this switch over.

You don't seem to grasp the basic concept of markets.

Issuing more buy orders cannot cause a drop in price.

In your scenario, you propose that large businesses around the world issue a practically limitless number of buy orders on BTC, supposedly at a low-balled price, supposedly inducing people to fulfill those orders...

You can't affect the price of anything buy flooding the market with an enormous number of low-balling buy orders. You can create a floor, but that puts a lower bound on how far bitcoins can call - it doesn't induce the fall.

The buyers and sellers have come to an agreement already. They prefer the price of $1000. Any large retailer attempting to manufacture an artificial peg would only create a good amount of temporary humor.

Retailers aren't going to set prices for their goods that might fluctuate from $1 to $10 to $50 back to $1 within a week or so. It'd make it impossible to run a business.

What they ultimately want is to guarantee they're going to receive the equivalent of $X for every widget they sell, so they'll either have to declare that Y BTC = X USD regardless of market prices, or they'll have to accept whatever Y in BTC is equivalent to X USD on a given exchange on a given day -- which is essentially equivalent to doing business in USD directly, with BTC as just a weird payment mechanism.

Businesses are going to be hesitant to accept BTC for the same reason they don't tend to accept payment in kind -- you need dollars to pay taxes and wages.

Payment processors such as bitpay offer same-day bitcoin-to-fiat conversion and bank deposit with extremely low fees (0.1% - 1%), and are becoming the defacto standard. This is expected during the bootstrapping phase. Later, if bitcoin firmly establishes itself, merchants could choose to not convert directly to fiat.

Merchants would still need to convert to legal tender for payroll, rent, and taxes. Their income and expenses would still be more efficiently denominated in dollars (or the local equivalent). What is the expected draw for businesses to keep their operating funds in BTC as opposed to USD?

Did you read my post? Bitpay converts bitcoin to the fiat currency of your choice. It is hassle free and much cheaper than credit cards.

That's complete nonsense. It would take virtually every merchant to partake in your fantasyland to have even a slim chance of convincing bitcoin holders to take massive losses. And only one Silk Road to retain bitcoin's viability.

And you apparently forgot that the total number of bitcoins is severely limited (around 20 million).

If BTC is trading higher than $1, everybody would buy the undervalued BTC for $1 and sell at the market rate. If BTC is trading lower than $1, everybody would buy BTC at market rate and sell the overvalued BTC for $1.

Both cases lead to significant losses for whoever is trying to peg BTC to some arbitrary constant value.

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