3 ms·

But cash is?

by drewbug 9y ago

But cash is?

soundwave106 9y ago
I would call Bitcoin a "speculative asset" right now, actually. Compared to major currencies, it is highly volatile. Bitcoin also is, in some sense, similar to a fiat currency (Bitcoin has no intrinsic value) without having the typical fiat currency backing (a supporting government, complete with armies, laws and their enforcement agencies, etc. sponsoring the currency). This adds a degree of risk to Bitcoin most other currencies do not have. Definitely I'd see it as an asset though.
- qznc 9y ago
  Not being government backed does add risk? Bitcoin cannot declare bankrupty, but governments can (ok, affecting bonds primarily). Also, governments can abandon currencies and use different ones.
  - soundwave106 9y ago
    Governments can attempt to legislate away / restrict Bitcoin at any time, and have muscle power to attempt to enforce this. The converse is not true. This is the main reason I say that there is added risk. You are correct that government backed currency is indeed absolutely not risk free either in all cases; if confidence in the government is lost, the "official" currency might end up as worthless, and alternatives may prosper even despite heavy-handed government efforts in some cases. There is such a thing as speculative fiat currency. Having said that, even though forex is generally considered more risky than other sorts of investments, the likelihood of the governments of the major currency players executing the sort of serious humdingers to move their currencies into the "speculative" category seems quite low to me. (Of course, nothing in investing is guaranteed, but still...) I'll also add that, from what I see, Bitcoin "governance" -- the technical code decisions (https://www.economist.com/blogs/freeexchange/2017/09/not-so-novel https://www.economist.com/blogs/freeexchange/2017/09/not-so-...) -- is somewhat in flux right now, eg the dramas over bitcoin blocksize limits. This also adds risk.

3 ms·

But cash is?

by drewbug 9y ago

But cash is?

soundwave106 9y ago
I would call Bitcoin a "speculative asset" right now, actually. Compared to major currencies, it is highly volatile. Bitcoin also is, in some sense, similar to a fiat currency (Bitcoin has no intrinsic value) without having the typical fiat currency backing (a supporting government, complete with armies, laws and their enforcement agencies, etc. sponsoring the currency). This adds a degree of risk to Bitcoin most other currencies do not have. Definitely I'd see it as an asset though.
- qznc 9y ago
  Not being government backed does add risk? Bitcoin cannot declare bankrupty, but governments can (ok, affecting bonds primarily). Also, governments can abandon currencies and use different ones.
  - soundwave106 9y ago
    Governments can attempt to legislate away / restrict Bitcoin at any time, and have muscle power to attempt to enforce this. The converse is not true. This is the main reason I say that there is added risk. You are correct that government backed currency is indeed absolutely not risk free either in all cases; if confidence in the government is lost, the "official" currency might end up as worthless, and alternatives may prosper even despite heavy-handed government efforts in some cases. There is such a thing as speculative fiat currency. Having said that, even though forex is generally considered more risky than other sorts of investments, the likelihood of the governments of the major currency players executing the sort of serious humdingers to move their currencies into the "speculative" category seems quite low to me. (Of course, nothing in investing is guaranteed, but still...) I'll also add that, from what I see, Bitcoin "governance" -- the technical code decisions (https://www.economist.com/blogs/freeexchange/2017/09/not-so-novel https://www.economist.com/blogs/freeexchange/2017/09/not-so-...) -- is somewhat in flux right now, eg the dramas over bitcoin blocksize limits. This also adds risk.