It is essential to remember that there is massive inflation of the money supply going on (by design), and that this is the key driver of the price downwards. ~35% increase in the money supply over the next 12 months; proportionately higher over the last 12 (as the same in absolute terms).
Its rise to $30 was driven by hype and speculation. The falling prices stop any speculators jumping on board, and there is no significant 'economy' yet. The rate of money supply increase will be halved in 2013, so don't expect any recovery before then.
I'd say yes. All/almost early adopters are already enlisted so to speak, and most are already stocked with bitcoins.
And every hour 300 new bitcoins are mined, I'm still willing to buy some, but I'm a rather late adopter, and, obviously, there a limit for me too, after which I'll stop buying.
Anyway if bitcoin will survive until 2013 then... I'll be ready to accept bets (as in 10 to 1) that it will make it.
So they should jump out of a highly liquid, government-backed security that's proving untrustworthy to go into an experimental currency that's relatively illiquid? I'd think they'd go towards gold, which seems like the opposite direction.
If people are jumping out of a printed currency to avoid inflation, they're going to want something where they know it's easy to convert back into something you can buy things with. Jumping into a cryptocurrency for their cash holdings would require they believe that they can easily jump back out.
Of course it would require more infrastructure around bitcoin. There is already an impressive amount of exchanges, and it would be pretty easy to exchange bitcoins with software like android bitcoin wallet. excellent app btw: https://market.android.com/details?id=de.schildbach.wallet
Gold isn't really a good instrument of exchange. Gold-backed currencies are, but the central issuer has proved problematic historically.
Of course cryptocurrency used widespreadly is just a nerd fantasy right now, but I believe in it more than to a new gold standard :)
It's not a matter of infrastructure. It's a matter of belief: people who are looking for safety and refuge from inflation aren't going to move their money into a less-liquid, less-tangible asset with no track record (relative to alternatives.)
Moving cash into bitcoin would make sense if there were some inherent advantages: better returns, more liquidity, better privacy, more stable values, faster transactions. So far, I don't really see any of those being offered; it's essentially an experiment, and folks who are using it are either doing to speculatively or for curiosity value, not economic reasons.
> people who are looking for safety and refuge from inflation aren't going to move their money into a less-liquid, less-tangible asset with no track record (relative to alternatives.)
I will. The point is, at the margin, some people will. All and at once? Never! The more adventurous and tentatively? Yes.
Now it all depends on relative outcome of different strategies.
Its rise to $30 was driven by hype and speculation. The falling prices stop any speculators jumping on board, and there is no significant 'economy' yet. The rate of money supply increase will be halved in 2013, so don't expect any recovery before then.