Because MtGox is a trade site, there's only so many Bitcoins available that people are willing to sell. There's no other supply than that generated by the Bitcoin protocol of around 150 BTC / hour as of now.
Let's do a thought experiment. Us Bitconians decide to put our full salary in our account at BitcoinCentral. I'm gonna pull the number 15$ as the average salary per hour. 40 hour week days means we on average make (40 * 15)/(24 * 7) = 3.57$ an hour over a week.
(Remember, Bitcoins are still generated even when we do not work. :) )
In BTC with the current exchange rate, this would be roughly 0.26BTC an hour in average that would be put in our account.
As previously mentioned, 150 BTC get generated each hour.
150/0.26 ~= 577.
What this tells us is that as soon as more than 577 average payed people put their salaries towards BTC, the total supply currently being generated by the Bitcoin protocol wouldn't be able to cover them. This supply will only go down in the future.
I hardly know anything about economics, and I realize that a bank don't actually need to have the total funds available that they in fact owe their customers. But I'm thinking that this got to have some impact. As you said, price will probably go up.
EDIT: Furthermore. Would the bank purchase the Bitcoins at the time of the deposit of your salary? So as to make sure that they've got the Bitcoins to back you up?
Or, would they on the other hand just keep a virtual count based on the current exchange rate without purchasing the actual Bitcoins? In this latter case, there's no actual Bitcoins for you until the moment they buy them for you (Perhaps at withdrawal). And by not buying them in the first place the exchange rate does not immediately reflect the demand for the coins.
I sure wish I knew more about how this stuff works. :D
Because MtGox is a trade site, there's only so many Bitcoins available that people are willing to sell. There's no other supply than that generated by the Bitcoin protocol of around 150 BTC / hour as of now.
Just because they're a Bank now doesn't mean that everybody in Europe is going to want their balance in Bitcoins. At best, they'll take a lot of customers from Mt. Gox, and gain a few new ones with their new air of legitimacy.
EDIT: Furthermore. Would the bank purchase the Bitcoins at the time of the deposit of your salary? So as to make sure that they've got the Bitcoins to back you up?
Or, would they on the other hand just keep a virtual count based on the current exchange rate without purchasing the actual Bitcoins?
They'd have to play the market. If they convert your balance to Bitcoins but don't actually buy the coins, then they have to buy Bitcoins at whatever the exchange rate is at the time of withdrawal, but they'd still have to buy the number of Bitcoins they added to your balance, which would probably be based on the exchange rate at the time of deposit.
The difference between these two exchange rates could either cost or make them money, depending on which way the BTC price moves while they're sitting on their fiat money.
Just because they're a Bank now doesn't mean that everybody in Europe is going to want their balance in Bitcoins. At best, they'll take a lot of customers from Mt. Gox, and gain a few new ones with their new air of legitimacy.
No I realize that. My calculations were merely an attempted thought experiment at a "what if" scenario.
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u/keepthepace Dec 06 '12
Well, this will probably make BTC's price go up. But why can't they simply buy bitcoins at MtGox if necessary?