Bitcoin made a lot of sense when I first read about it in 2011. Back then I feel like it was primarily used as an anonymous payment method. Think dark web/silk road type stuff. I certainly don't endorse that behavior, but bitcoin as a payment method made a lot of sense.
Bitcoin makes 0 sense to me as an investment. It's pure speculation with no underlying intrinsic value. It's the Dutch Tulips 10.0 basically.
And now because the value of bitcoin is unbelievably volatile, it now makes 0 sense as a means of payment.
The problem right now is that Bitcoin is not (used as) a currency. A currency facilitates the exchange of services of goods. Bitcoin now is more like a plot of land in the middle of London, or gold a few years ago. You buy bitcoins to hold and speculate, not to spend and pay your purchases with it. The resurrection of Bitcoin as as currency after the bubble will be a very interesting transition to watch and it's not 100% sure that Bitcoin will survive it.
Bitcoin itself is a flawed and dangerous idea. What makes the value of money is the trust you put into the economics institutions of some territory. Value of money should not be derived from some computational tricks but should be the reflect of the real economy. The other explanations including some from Wall street (remember Subprimes ?) are just big misredirections some conmen invented to take a lot of money from your pockets. Bitcoin is just a modern version of a pyramidal scheme. Think of it as pyramidal scheme 2.0
The problem is that bitcoin is now dominated, at least it seems to me, by speculative investment. And that's not what currency is about. People value currency not because it appreciates but because it is stable. Runaway inflation and deflation are both bad for monetary systems, but here we have people imagining that deflation is fan-fucking-tastic for bitcoin.
And that's telling, because it indicates that bitcoin isn't a medium of exchange, it's an investment denominated in dollars. People are talking about the "price" of bitcoin more than anything these days, but that's not why people choose a medium of exchange. Bitcoins shouldn't be exciting, they should be boring, and dependable. As boring and dependable as a dollar bill.
I still don't get why people consider bitcoin a suitable form of currency. It has a fixed supply, so its value is going to vary wildly - depending on demand. That's the opposite of what you want from a currency (where your main goal is price stability).
Bitcoins are just special numbers--there's no inherent value in them. If everybody decides tomorrow to use a different blockchain they will become completely worthless numbers.
A tulip looks pretty in your garden, (many) internet companies make money, and houses are a basic necessity. Bitcoin, on the other hand, is a purely social phenomenon. It has value only because other people think it has value.
The argument trotted out at this point is some variation of "but there is value in having an anonymous, decentralized currency." And that may well be true. But the high valuation and extreme volatility of bitcoin (not to mention its inherent deflationary character) is actually a hindrance to its use in that manner. Who will accept bitcoin if its value can fluctuate 100% in an hour, and who will spend them if their price just keeps going up?
Why do people keep thinking about bitcoin as a currency? It was its original intent but these days it's more seen as gold.
The value of the bitcoin is the money invested in it that alone can be used for something where the need for transactions aren't high, as an example for large international contracts.
I don't know anyone with just the slightest understanding of bitcoin who believe it's a currency anymore.
Please tell me how bitcoin is useful as a currency. Pretty much anyone with any understanding of economics would tell you that it's a terrible currency (and frankly, a questionable investment)
Bitcoin was designed to be honest and sound money. In the way that gold once was. Contrary to the way fiat money is.
For now, the fundamentals are simple: supply side is fixed and known, and demand is speculation.
In the ideal case for bitcoin, over time, people will gradually use bitcoin more for actual commerce. As this adoption increases, liquidity increases, and price becomes less volatile. The speculation we have now is the necessary first step on that road, because it gives bitcoin a price (i.e. props it up) and gives it some liquidity.
People complaining that bitcoin is just for crime are slandering it.
People complaining that it has no intrinsic value don't understand that nothing in the world has intrinsic value, including gold. Intrinsic value is bad monetary theory derived from bad philosophy.
Bitcoin as an investment always struck me as a rather silly idea.
Bitcoin was supposed to be useful because it was a decentralized currency, but a functional currency should, by definition, not be a good investment (that is, something that increases in value more quickly than other assets in the economy).
If the relative value of your currency keeps increasing, then you don't want to spend it, if people aren't spending the currency then it is not in fact a functional currency, and if it is not a functional currency, then it ought not have any value.
Articles like this demonstrate why most people don't get Bitcoin in the 1st place. Let's ignore the factual inaccuracies like bitcoin production bottoming out in 2040 (it's 2140, Justin, and that's a big difference) and focus on how Justin doesn't get it.
Bitcoin is in use right now transferring money around the globe. If I buy 100$ worth of bitcoin (0.478 bitcoin at current prices) and immediately use it to purchase anything, it has served its purpose as a value transfer medium. This is regardless of tomorrow or yesterday's price. It is this efficacy that people pay for when they buy bitcoins.
Bitcoin was not designed as a storage or investment medium it was designed to facilitate the transfer of value. As long as it performs that function it will continue to defy the misplaced expectations of those who refuse to go to the effort of understanding it.
It’s crazy that some people seriously think Bitcoin is anything like these stores of value.
All these are ties to some fundamental value to society. If gold goes down, manufacturing will buy more of it because they use them for ICs and lots of other things. Most companies have some tangible assets behind them. If a stocks price goes far enough down someone might buy up a controlling stake and liquidate all the assets. A fiat currency in a functional state is generally strongly tied to borrowing for real physical assets. It’s deeply entangled with the economy.
There is no bottom for Bitcoin. Especially now that it’s not a very viable currency for most purchases or for lending.
What’s more, value is continually being extracted from the currency. People cashing out and payments to miners (who are basically just burning a lot of the money they make by converting electricity to heat without doing much useful work).
In gold or stocks the money put in actually exists in something valuable to society, and you own a piece of that. The the value might be boosted up 2-10x its real value today, perhaps due to its perceived future value. But you do own a piece of something tangible.
With Bitcoin, the money you put in is already gone. Used by a miner to pay for electricity or an early miner/purchaser who is now cashing out to buy an apartment. You just gotta pray that a few years down someone is willing to buy bitcoins from you for its perceived value alone. Because nobody is going to buy it for any other reason. Not to make something out of it (gold), not to liquidate the assets behind it (stocks), and not to pay taxes or pay back their mortgage (fiat currencies)
There’s so much utter insane and thinking around cryptocurrency these days. Especially Bitcoin. It’s madness.
I mean, it’s a super cool tech. But I think that blinds a lot of people to the facts around it.
I still don't get why I would want to hold a bitcoin for anything other than speculation. If I want some form of currency to actually use there are plenty of less volatile options.
Forgive me for being skeptical, but I’ve never seen Bitcoin used as a medium of exchange. You could argue it’s a store of value, but that’s also contentious. In the last year, it’s back to its original price. So much for being an inflation hedge.
Bitcoin makes 0 sense to me as an investment. It's pure speculation with no underlying intrinsic value. It's the Dutch Tulips 10.0 basically.
And now because the value of bitcoin is unbelievably volatile, it now makes 0 sense as a means of payment.
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