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Here's the basic thing: Bitcoin is fatally flawed. Is it meant to be a payment method (in which case an ETF or otherwise treating it as an investment vehicle is

by dhosek 10y ago

Here's the basic thing: Bitcoin is fatally flawed. Is it meant to be a payment method (in which case an ETF or otherwise treating it as an investment vehicle is roughly as nonsensical as having an ETF that deals with blank checks) or is it an investment (and if it's an investment, what on earth are people investing in?). The volatility of Bitcoin plus the constrained supply leading towards upwards pressure on the price of bitcoins mean that it's a deflationary currency and deflation is a bad thing as it creates an incentive to not spend. This means that the only real reason to spend Bitcoin or otherwise use it as a payment is for situations where that's the only option and right now, and for the foreseeable future, that means assorted illegal or at best borderline illegal products, which gives it a halo if unrespectability that the Winkelvoss twins are not going to erase. Perhaps a blockchain-based cryptocurrency might in the future resolve these issues, but otherwise it's a doomed product that I wouldn't put a single penny (or watt of household electricity) into.

dmichulke 10y ago
> deflation is a bad thing as it creates an incentive to not spend Positive interest rates would be bad by the same logic
- cortesoft 10y ago
  What, why? Positive interest rates are meant to compensate FOR inflation. Because there is inflation, people can't just hold onto their money in cash; they have to put it into an interest bearing account in order to not lose money over time. Keeping your money in a bank account is NOT the same as hoarding a currency, because the money in a bank account is lent out to other people to spend. Money in a bank account is still participating in the economy. Bitcoin investors are not like this; they are holding onto the money in hopes the value goes up. The bitcoins they are holding are not being used for any financial transactions. Those bitcoins are essentially out of the economy while they are being held. This is bad for an economy, when the currency is more valuable as an investment than as a vehicle for economic transactions.
  - hndamien 10y ago
    This is not how it works at all. Holders/ "hoarders" of Bitcoin do not decrease the utility of the network one iota. Because there is infinite divisibility, if I want to take some fiat and move it to another place via the network then return it to fiat at some arbitary price at a point in time, the fact people are holding (even if 99% of all Bitcoins were locked up) makes no difference to the utility of the network. All that has happened is that the decimal point has moved. What is happening is that supply is reduced. Demand has presumably remained the same as it otherwise would have been, and as a result the price rises. This is great for people holding, and it encourages more saving - but the rising tide is lifting for all boats here. For you who is just temporarily utilising the network, the fact that the price of Bitcoin might be ludicrously high (in your opinion) doesn't change the fact that you can utilise the advantages of a decentralised liberated money for your wealth movement at the same cost that it would have been if Bitcoin were at a low price.
TwoBit 10y ago
How is Bitcoin significantly different from gold? I suppose gold does get used for something.
- djrogers 10y ago
  Nobody is pushing for vending machines or retailers to take gold...
  - jacquesm 10y ago
    https://en.wikipedia.org/wiki/Gold_to_Go https://en.wikipedia.org/wiki/Gold_to_Go
- nassirkhan 10y ago
  Bitcoin is time delimited and finite whereas gold is finite. If major financial systems were to fail, the values of both would skyrocket, although bitcoin would make a better medium of exchange because of portability, in my opinion.
- fennecfoxen 10y ago
  Bitcoin is a better medium of exchange than gold. It's trivially divisible, it can be checked against fraud and counterfeiting with a quick electronic test, and it can be sent around the world in minutes without the expenses usually associated with armed escort. If you're paying some random person in Venezuela a two or three figure sum, Bitcoin is better than gold, and probably more anonymous. Gold is probably a better store of value than bitcoin. It's not a great one, mind you (the price is still too volatile). Its security can also be assured with physical protections that are easier for a layman to understand than bitcoin's electronic protections. Bitcoin has a small but nonzero chance of a total collapse in its value which gold will not face until widespread exploitation of asteroid-based mineral resources is commonplace. Neither are effective units of account.
sneak 10y ago
Ahh, the old "bittorrent is only used for piracy" argument.
lawn 10y ago
> Is it meant to be a payment method or is it an investment Ideally it should be both. > This means that the only real reason to spend Bitcoin or otherwise use it as a payment is for situations where that's the only option and right now, and for the foreseeable future, that means assorted illegal or at best borderline illegal products There are plenty of legal products you can buy. > Perhaps a blockchain-based cryptocurrency might in the future resolve these issues, but otherwise it's a doomed product that I wouldn't put a single penny (or watt of household electricity) into. The only real issue you're pointing out is the finite supply (volatility will sort itself out in time) which for example Monero answers with a "tail emission" meaning there is an ever increasing amount of coins.
Taek 10y ago
It protects you against hyperinflation. It also protects the innocent from having their funds unfairly seized. It puts you in control of your money in a way that no other asset can. Bitcoin's biggest use case is as an emergency fund. People in Venezuela who bought at $1200 in 2013 were still doing comparatively well when the price was $200. If oppressive capital controls crack down in a nation like Turkey, Bitcoin can protect you. Bitcoin is excellent for protecting yourself during financial emergencies. High volatility is acceptable in these situations. Some money is better than no money at all.
empath75 10y ago
Nothing you've said about Bitcoin is new, and yet it's been around for half a decade now, and the price is still in the $1000/coin range. At some point people are going to recognize that whatever it's used for, it has some value.
ChemicalWarfare 10y ago
I think your logic is flawed. You're saying bitcoin's deflationary nature is bad and then proceed to talk about how volatile it is and the bad vibe that it carries BECAUSE it keeps going up in price so the only reason to spend it is for illicit things. So then here's the controversy of your statement - if bitcoin is a deflationary appreciation-only thing - then maybe it's not as volatile as you claim and is fit to be used in EFT scenarios? Or if it is in fact volatile then maybe it's not all that deflationary in that it's value isn't bound to be going up indefinitely? Which is it? :) As a side note - yes, the mechanics of coin mining do make bitcoin "technically" deflationary, but just like any other "thing of value" this doesn't guarantee it's value in the "real world" to be mapped to that deflation 1-to-1. There's a finite supply of gold or oil out there for example - their prices however are bound to fluctuate quite a bit...

by dhosek 10y ago

dmichulke 10y ago

> deflation is a bad thing as it creates an incentive to not spend Positive interest rates would be bad by the same logic

cortesoft 10y ago
What, why? Positive interest rates are meant to compensate FOR inflation. Because there is inflation, people can't just hold onto their money in cash; they have to put it into an interest bearing account in order to not lose money over time. Keeping your money in a bank account is NOT the same as hoarding a currency, because the money in a bank account is lent out to other people to spend. Money in a bank account is still participating in the economy. Bitcoin investors are not like this; they are holding onto the money in hopes the value goes up. The bitcoins they are holding are not being used for any financial transactions. Those bitcoins are essentially out of the economy while they are being held. This is bad for an economy, when the currency is more valuable as an investment than as a vehicle for economic transactions.
- hndamien 10y ago
  This is not how it works at all. Holders/ "hoarders" of Bitcoin do not decrease the utility of the network one iota. Because there is infinite divisibility, if I want to take some fiat and move it to another place via the network then return it to fiat at some arbitary price at a point in time, the fact people are holding (even if 99% of all Bitcoins were locked up) makes no difference to the utility of the network. All that has happened is that the decimal point has moved. What is happening is that supply is reduced. Demand has presumably remained the same as it otherwise would have been, and as a result the price rises. This is great for people holding, and it encourages more saving - but the rising tide is lifting for all boats here. For you who is just temporarily utilising the network, the fact that the price of Bitcoin might be ludicrously high (in your opinion) doesn't change the fact that you can utilise the advantages of a decentralised liberated money for your wealth movement at the same cost that it would have been if Bitcoin were at a low price.

TwoBit 10y ago

How is Bitcoin significantly different from gold? I suppose gold does get used for something.

djrogers 10y ago
Nobody is pushing for vending machines or retailers to take gold...
- jacquesm 10y ago
  https://en.wikipedia.org/wiki/Gold_to_Go https://en.wikipedia.org/wiki/Gold_to_Go
nassirkhan 10y ago
Bitcoin is time delimited and finite whereas gold is finite. If major financial systems were to fail, the values of both would skyrocket, although bitcoin would make a better medium of exchange because of portability, in my opinion.
fennecfoxen 10y ago
Bitcoin is a better medium of exchange than gold. It's trivially divisible, it can be checked against fraud and counterfeiting with a quick electronic test, and it can be sent around the world in minutes without the expenses usually associated with armed escort. If you're paying some random person in Venezuela a two or three figure sum, Bitcoin is better than gold, and probably more anonymous. Gold is probably a better store of value than bitcoin. It's not a great one, mind you (the price is still too volatile). Its security can also be assured with physical protections that are easier for a layman to understand than bitcoin's electronic protections. Bitcoin has a small but nonzero chance of a total collapse in its value which gold will not face until widespread exploitation of asteroid-based mineral resources is commonplace. Neither are effective units of account.

sneak 10y ago

Ahh, the old "bittorrent is only used for piracy" argument.

lawn 10y ago

> Is it meant to be a payment method or is it an investment Ideally it should be both. > This means that the only real reason to spend Bitcoin or otherwise use it as a payment is for situations where that's the only option and right now, and for the foreseeable future, that means assorted illegal or at best borderline illegal products There are plenty of legal products you can buy. > Perhaps a blockchain-based cryptocurrency might in the future resolve these issues, but otherwise it's a doomed product that I wouldn't put a single penny (or watt of household electricity) into. The only real issue you're pointing out is the finite supply (volatility will sort itself out in time) which for example Monero answers with a "tail emission" meaning there is an ever increasing amount of coins.

Taek 10y ago

It protects you against hyperinflation. It also protects the innocent from having their funds unfairly seized. It puts you in control of your money in a way that no other asset can. Bitcoin's biggest use case is as an emergency fund. People in Venezuela who bought at $1200 in 2013 were still doing comparatively well when the price was $200. If oppressive capital controls crack down in a nation like Turkey, Bitcoin can protect you. Bitcoin is excellent for protecting yourself during financial emergencies. High volatility is acceptable in these situations. Some money is better than no money at all.

empath75 10y ago

Nothing you've said about Bitcoin is new, and yet it's been around for half a decade now, and the price is still in the $1000/coin range. At some point people are going to recognize that whatever it's used for, it has some value.

ChemicalWarfare 10y ago

I think your logic is flawed. You're saying bitcoin's deflationary nature is bad and then proceed to talk about how volatile it is and the bad vibe that it carries BECAUSE it keeps going up in price so the only reason to spend it is for illicit things. So then here's the controversy of your statement - if bitcoin is a deflationary appreciation-only thing - then maybe it's not as volatile as you claim and is fit to be used in EFT scenarios? Or if it is in fact volatile then maybe it's not all that deflationary in that it's value isn't bound to be going up indefinitely? Which is it? :) As a side note - yes, the mechanics of coin mining do make bitcoin "technically" deflationary, but just like any other "thing of value" this doesn't guarantee it's value in the "real world" to be mapped to that deflation 1-to-1. There's a finite supply of gold or oil out there for example - their prices however are bound to fluctuate quite a bit...