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Like any other tradeable thing: on an exchange. If you don't think the exchange rate BitInstant gave you is fair, it's easy to go to a site like BitcoinCharts and look at the spot prices at the time on any of the exchanges in existence for the currency you were converting too. After all, the back-end of BitInstant is just a computer program that automatically submits sell orders as required to meet their float requirements. Buyers then buy the Bitcoins, giving BitInstant fiat currency in return, which they then send to the bank handling the debit card backend via wire transfer.

The key thing from BitInstant's point of view is to have solid reliable backend software that submits orders fast enough, and statistically understands the volatility well enough, to figure out what instantaneous exchange rate they can make a profit on while still giving a good enough rate that their users don't feel ripped off. This is easy if the price of Bitcoins is rising, but if it's dropping they could easily be in a situation where they give you too much fiat currency for too little Bitcoins. Part of the issue too is that spreads between buy's and asks on Bitcoin exchanges tend to be much larger than you'd find in government-issues currency exchanges, simply because the market is smaller. They're looking at spreads in the region of one percent, rather than hundredths of a percent.

Ultimately though the process is no different from what your bank does if you use a USD denominated debit card in Europe.

There are several bitcoin exchanges. Current value of 1btc is about $10

http://bitcoincharts.com/charts/mtgoxUSD#rg90ztgSzbgBza1gSMAzm1g10zm2g25zi1gMomentumzi2gRSIzi3gSStochzv

No:

http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25

It's interesting to compare with the Gartner hype cycle:

http://en.wikipedia.org/wiki/Hype_cycle

"Bitcoin offers anonymity, but isn't backed by any government and has seen high-profile hacks and collapses in value."

"...isn't backed by any government..."
Sounds good to me. Certainly true anyway.

"...has seen high-profile hacks..."
Bitcoin hasn't been hacked, some Bitcoin websites have been hacked.

"...collapses in value."
There was certainly that big bubble, but other than that it's been fairly stable. Certainly for the last many months.
http://bitcoincharts.com/charts/mtgoxUSD#tgCzm1g10zm2g25

It's certainly interesting to look at what has happened with the value of bitcoin.

http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zvzl

up to about a year ago we saw a trenth of lots of volatility combined with a general expontential growth trend the value of bitcoin leading to a high of about $30 per bitcoin.

Then we saw a trend ot lots of volatility combined with a general exponential decay reaching a lot of arround $2 per bitcoin. After that we saw more peaks and troughs but each time they got smaller and it seems that bitcoin is now finally starting to settle on a stable value.

Looks like the fear and greed driven speculators are finally getting out of the market :)

Current evidence shows that people are NOT hoarding the coins: every day, 40 thousand coins change hands on the single largest exchange: http://bitcoincharts.com/markets/mtgoxUSD.html [bitcoincharts.com] This is six times the number of coins created daily by the network (7 thousand).

That's about 0.4% of the 9.2 million total bitcoins in existence right now.

You are wrong. The "hoarding" argument has been beaten to death. Current evidence shows that people are NOT hoarding the coins: every day, 40 thousand coins change hands on the single largest exchange: http://bitcoincharts.com/markets/mtgoxUSD.html This is six times the number of coins created daily by the network (7 thousand).

In other words, people are not hoarding them, but are trading them very, very frequently.

And this is just measuring MtGox's volume. Other trades (merchant sales, other exchanges, etc) are likely doing even bigger volume...

Is that the same kind of oxymoron as the 'relative stability' of bitcoins?

Bitcoins *have* had an unprecedentedly stable price of approximately $5 since March 2012. This is more-or-less what we should expect, given that they've followed the standard Gartner hype cycle for emerging technologies pretty closely so far.

May I suggest you check out this graph?

oh boy..

I could have written a much longer description but I think that the Ars Technica article covers it well. The claim that Mt. Gox is the only other exchange is silly though. There are many exchanges and Tradehill was only slightly bigger than Intersango and Cryptoxchange. Both of these exchanges have started to push their marketing especially at Bitcointalk forums, after this incident: https://bitcointalk.org/index.php?topic=63941.0 & https://bitcointalk.org/index.php?topic=63877.0

So that everyone clearly understands, Mt. Gox is by far the biggest exchange. Even though Tradehill was the 2nd biggest exchange, it was tiny compared to Mt. Gox. Both Intersango and Cryptoxchange were almost as big as Tradehill at the time of its demise. This information is available at http://bitcoincharts.com/markets/

I didn't pull anything out of my hat but I could have perhaps added a few more links and a slightly longer description.

Yes i've taken a look at the international exchange rates and at least among major currencies they do change a bit but not by anything like the ammount bitcoin does. When a currency does change rapidly relative to the other currencies it's usually indicative that the shit has hit the fan in the country that owns that currency.

http://www.advfn.com/p.php?pid=qkchart&symbol=FX%5EUSDEUR

http://www.bitcoincharts.com/charts/mtgoxUSD#rg360ztgMzm1g10zm2g25

Afaict bitcoin's real problem has been that the vast majority of it's users are people looking to make a quick buck through either mining or speculation. Not people who were actually looking to use it as a trading medium and even those using it as a trading medium were only using it for a tiny fraction of their transactions.

Bitcoin price over the past year: http://bitcoincharts.com/charts/mtgoxUSD#rg360zvztgCzm1g10zm2g25

What every asset bubble looks like: http://www.housepricecrash.co.uk/graphs-bubble-lifecycle.php

Bitcoins are going to keep falling, they're not at the "despair" part of the cycle yet.

The initial bit-coin spike was mostly an artifact of it's promise for anonymous transactions. Anonymity caused sites like the silkroad to appear, as the value of anonymous transactions began to become apparent, the demand for bitcoins began to rise rapidly enough that speculators decided to get involved. Tack on a few mainstream news articles and the lack of other resource based options at a time when most of the worlds economies are printing money to pay off debts, and people who wouldn't otherwise be as speculative become so.

Despite the conclusions one might draw from Krugman's article, the number of Bitcoins is actually designed to inflate relative to the output of society (based on the relative amount of available processing power) unlike traditional resource backed currencies. Thus, the current boom and horde should not be attributed to a failure of the Bitcoin currency, but instead a failure of confidence in the fiat model. For instance, imagine you are an Argentinean during their finical collapse. Now imagine there being a small and limited amount of stable US dollars available to convert your hyper-inflating Argentinian currency into. One can reasonably assume we would see exactly the same effect with dollars as we do in bit-coins if more dollars are not created out of thin air.

Realistically, current monetary policy has us print more dollars as demand increases in order to stabilize prices. This works until the stressed market stabilizes again and people let go of their dollar holdings to go back to their native currency thereby creating inflation. All said, it's probably the lesser of two evils, which is why I would argue that another bitcoin like currency could be the appropriate way to buffer the demand. Yet it seems that the current instance of bitcoin hyper-valuation is likely only a blip and will continue for a short period of time relative to the current world economic decline. Further, there are already signs that the speculation and volatility is beginning to end: http://bitcoincharts.com/charts/mtgoxUSD#rg180zvztgSzm1g10zm2g25

In summary, the point I'm trying to make here is 2 fold. First, if we all had access to a stable currency (like bitcoin), there would not be any incentive to horde bit-coins. Second, if the appropriate response to overwhelming demand for a currency is to make more of it, then there is actually a way to create more bitcoin like currency. Yet since more currency isn't actually necessarily as no one currently trades exclusively in bitcoin, and because the rest of the world is working with a fiat system, the hyper-valuation of the currency is to be expected, but cannot be pointed to as a failing of the bitcoin system.

(Also, it's interesting to not that most sites that take bicoin haven't been chaining their prices to match the hyper inflation, which is why I refuse to use the term deflation in terms of the bit coin market.)

-JHF

In the one-in-a-billion chance that 20 years from now the entire world's economy is being transacted in bitcoins, you'll be a multibillionaire.

I know that "billionaire" part is just a figure of speech, but let's find out how large the bitcoin jackpot really is, for curiosity's sake.

Suppose miraculously bitcoin manage to completely replace both the USD and the Euro tomorrow. There are currently:
980 billion USD in circulation
863 billion Euros in circulation (~1.2 trillion USD)
7.2 million bitcoins in circulation
Thus each bitcoin would be worth approximately 300k USD. Hardly makes you a millionaire, let alone a billionaire.

Disclaimer: I have never taken an economics course in my life and I have been repeatedly characterized as "terminally retarded" in Internet discussions. The above calculations might not land in the right sport, let alone the right ballpark.

I don't know of any bank I can convert from bitcoin to dollars, thus, to me it's worthless.

http://bitcoincharts.com/markets/

HTH. HAND.

1) The expansion curve has nothing to do with the volatility BTC is currently experiencing; that's because it's a new currency with an uncertain future (in terms of who will accept it later).

The expansion curve has everything to do with BTC's issues. The poorly-chosen curve guarantees deflation if the currency is going to expand to a level where the net value of every BTC in existence is more than a trivial, useless, quantity. Expected deflation triggers hoarding. Hoarding triggers illiquidity. Illiquidity triggers volatility.

2) People's expectations of a nascent currency's volatility are way too high. Any new currency is going to be that way! This expectation is effectively ruling out any new currency that can't get its volatility down to that of the USD immediately -- which means you're against any new currencies that don't start with some stabilizer. (Btw, no you can't tell me how much gasoline a USD will buy tomorrow.)

When the Euro was introduced, nothing even remotely like this volatility occurred. Nothing like this: http://bitcoincharts.com/charts/chart.png?width=1228&m=mtgoxUSD&k=&r=60&i=&c=0&s=&e=&Prev=&Next=&v=1&cv=0&ps=0&l=0&p=0&t=S&b=&a1=&m1=10&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&SubmitButton=Draw& That's a chart that I'd expect to see with a pump-n-dumped penny stock or a fad like Beanie Babies. Not a serious means of value transfer.

This is a problem with the currency, not "people." If the currency was more liquid because of a better chosen expansion curve, it would not be an issue. (BTW, I can say that my USD will purchase 93-octane gas at around $3.90 to the gallon tomorrow in my area. I can say that with error bars of around 2%, barring some major swing in the world oil markets that have nothing to do with currency valuations. I can make no such statement about BTCs.)

3) Inflation and deflation are caused by changes in *expectation* of the growth the money supply. That is, it's only unexpected money shocks that change the price level/inflation rate. Bitcoin has broadcast how many there will be at all points in time, eliminating this uncertainty. This means that there will be no unexpected growth (though their could be unexpected velocity, liquidity, or acceptance level), and so the limited (final) quantity of bitcoins is *already priced in*.

So you won't have a scenario where, in 20xx, people say, "golly, they just stopped minting bitcoins, now they're suddently ultra scarce so we have to bid MORE MORE MORE for them." No: everyone will price in this event well in advance of the termination of growth.

At current prices, the total number of BTCs, after every single one has been mined many years from now, is roughly $303M (at current supply levels, it's much smaller, but I'm trying to cut the BTC some slack here.) For a currency that seeks worldwide adoption as an alternative to Visa/MC, this is, to be blunt, puny. Last year, Visa ran $5.4T in payments. If BTCs achieve the pathetic ubiquity of Discover (not accepted most places, little international presence), they managed to transact about $100B. If every BTC in existence at the end of BTC creation changed hands twice a week (which would be an unheard of currency velocity for an economy with a vaguely stable currency... the USD's velocity is approx. once a month.), the currency would have to deflate by a factor of 30 to reach $100B. (At the velocity of the USD, it would have to deflate by a factor of 240-ish.) Because it would have to deflate so much to be useful, it's unlikely to ever actually do so. T

other USD exchanges are still running fine.

From Bitcoin.org's market table:

• Bitcoin Market (also called MoneyBookers) Price 14.1, today's volume 49.9 bitcoins.
• Bitmarket.eu - despite the entry on bitcoin.org's chart, does not deal in USD.
• Btcex - site not responding, DNS server not responding.
• Bitcoin 7 - Price $15, today's volume 0.988027 bitcoin. (yes, < 1 bitcoin)
• Bitcoin Central - Price $16.9, today's volume 43.17 bitcoins.
• Bitcoin2Cash - Price $17.50, today's volume 82.75 bitcoins.
• Exchange Bitcoins - Price $14.85, today's volume 41.6 bitcoins.

Look at those tiny volumes. Total volume for all the little guys is under 0.1% of Mt. Gox, which was trading over 200,000 bitcoins per day. With Mt. Gox and TradeHill off-line, the market is dead. None of those little guys have any significant buyers available.

However I don't believe the "real"* value of a bitcoin is at the current exchange rate, it's probably closer to $12. I think the bitcoin market has been in a bubble for the past few weeks. A story such as this might help to bring down the price, long enough for an investor to buy, and whatever forces are driving the bubble would (possibly) continue and the value would go up again.

Here is a graph of a boom and bust cycle (full article here). Here is a graph of Bitcoin exchange rates. Anyone with common sense should be hugely alarmed by the bubble which is forming or the likely outcome that will follow on from it.

Look at the Bitcoin price chart . This is a price-only 90 day chart. The site normally displays the price on top of the volume, which obfuscates the trend. Displayed in this form, the chart just screams "bubble".

I'm sorry, isnt this graph, until June 8, also a graph that could represent the ideal growth situation of ANY monetary economy?

Look at the Bitcoin price chart . This is a price-only 90 day chart. The site normally displays the price on top of the volume, which obfuscates the trend. Displayed in this form, the chart just screams "bubble".

Yesterday's drop takes the price back to where it was on June 6. Which is twice the price of June 1. Which is twice the price of May 1. Which is three times the price of April 4. Yesterday just happened to be the first big drop.

Patterns like that in something that doesn't generate revenue are usually associated with "High Yield Investment Programs" and Ponzi scams. One wonders how many Bitcoins the people behind this bought early.

Bitcoin network charts:

In the last 12 days "There are 201 unconfirmed transactions".

That's not an "economy" by any means. Your average American highschool probably has more kids purchasing drugs, smokes, and booze from one another in a 12 day time period than that.

1. Bitcoins are so hard to generate that 1 BTC is worth about 0.80 USD currently. http://bitcoincharts.com/markets/
2. Correct. More powerful hardware (GPUs) generate more Bitcoins. Serious miners have farms of Radeon HD 5970.