Bitcoin Money Tactics

Adding Another Factor

For new purchases online, I wonder whether to spend bitcoins or USD when I am purchasing. If I think that the price of a bitcoin is going down, then I should use the bitcoins before it goes down and then just purchase bitcoins when it is lower. Some people watch the markets and might be good at being able to make predictions. They could record when they bought and make sure to use it only after bitcoins reaches +20% in value versus the USD. When you receive cash, use the cash only after bitcoins reaches -20% in value versus the USD. If we still see all of this volatility, people that do this will see a maximum purchasing power versus just using one form of payment. You might want to keep 50% USD and 50% bitcoins out of all of your disposable income. If you have leeway of when you can make purchases, then wait for a price dip or spike before making any purchases for goods or services.

Transaction Fees

For the near foreseeable future, transaction fees are an insignificant cost since the miners make their profits by being rewarded a certain number of bitcoins. The number of bitcoins rewarded gets cut in half every four years. If the volume of transactions grow large enough, then the fees will be significant profit for the miners. The volume of transactions or the transaction fees themselves must grow in order for the system to survive since the newly rewarded bitcoins get diminished over time.

The system can make an estimate for a fee for a transaction and the time it will take to process it. The client application calculates the fees. The transactions that include a higher fee will have higher priority in the system. There will be a huge market for free transactions just like the model with E-Mail and WWW. Most websites and e-mail services are free and the providers make their profits by advertising. This is what is happening with Bitcoin. Intelligent and innovative people will find ways to handle transactions for free by attaching an advertisement to the transaction so people in the network will see them.

Buy/Sell at Spread

People can make money by buying and selling at the same time around the asking price. Try to buy at 0.00000001 above the highest listing order and sell at 0.00000001 below the lowest selling price. If you continue to do this and keep a spread between the buys and sells, then there is a profit to be made. There are bots that do this in Bitcoin exchanges and many other types of exchanges. This creates a window between the buy and sell thus making a profit.

If the price is tumbling and the buy and sell does not happen immediately, then as long as the buys and sells take place at some point in time, than a profit is to be made. That just might take a while since we don’t know when the price will rise again. I’m certain that the price of bitcoins will rise again since the technology is so brilliant and there is a large international demand for such a technology. This can get complicated because the value of the US dollar or other currency that the bitcoin gets exchanged for might change in relation to Bitcoin. There is a natural equilibrium between the value of a dollar and a bitcoin keeping it at a fair market exchange price. However, the money invested into the bitcoin would be locked up and the investor would not be able to invest that money into anything else. Bitcoin makes it easy to automate this task since it programmable money.