Bitcoins are not sold at auction, they are traded like stocks, commodities, and currencies.<p>You have people making offers to buy and people making offers to sell. You're free to take someone else's offer or make your own. The biggest difference is probably that there are many many transactions for the same item occuring. When people are overpaying for auctions, it's because there is only one auction so only the highest bidder gets it. With Bitcoin (or stocks, or gold, or oil, or corn), people that didn't want to pay a particular price can wait for someone else to make a better offer and buy it later.<p>To take his jar of coins analogy, you would first have to create many jars with the same number/value of coins inside. Since no central entity creates Bitcoins, lets say the jars are distributed among a few hundred different people. When someone wants to sell one, he doesn't get the luxury of asking everyone else to make a bid - he has to compete with everyone else who wants to sell their jars. The buyers will line up in order of the price they are willing to pay, and the sellers in order of the price they are willing to take. Where they meet will be the price the market has discovered. There is no reason to believe that price would tend to be higher (or lower) than the real value of the jar based on auction theory.