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The difference is semantic. You don't invest in a depreciating asset (USD). Despite this fact, you still do have and use depreciating assets - cars, inflationar

The difference is semantic. You don't invest in a depreciating asset (USD). Despite this fact, you still do have and use depreciating assets - cars, inflationary currencies. It just so happens, that your preference is to get rid of bad money first (Gresham's law). When the bad money is gone, all you are left with is the next worst money/ wealth you have (money as in M0,M1 money stock etc.)

wpietri 9y ago
The difference is definitely not semantic when we are discussing the utility of a technology for a given use case. It's like saying all computers are basically the same -- which they are -- and then going on to conclude desktops and smartphones and rack-mounted servers are all interchangeable. Bitcoin may be a great investment asset. Time will tell. But its deflationary nature and its high volatility make it a bad currency. That's in obvious contrast to the original intention, which was a "purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."
- hndamien 9y ago
  Why is deflation bad?
  - wpietri 9y ago
    Deflation is bad for a currency because it means the currency will be worth more later. People hold on to things that they think will be more later. Currency, though, should be something people are comfortable spending. See here, for example, for a prominent Bitcoin advocate explaining that he no longer uses it as a currency: http://avc.com/2017/08/store-of-value-vs-payment-system/ http://avc.com/2017/08/store-of-value-vs-payment-system/ This is especially a problem when a currency is used by a lot of people. It discourages economic activity and increases the value of debt. Imagine, for example, that you had taken out a Bitcoin-denominated car loan on Jan 1 2016 with a monthly payment of 1 BTC. That's about $440 at the time, or 15 hours at the median US wage. Now you'd have to work 40x as much to cover the loan payment, or about 20 hours a day just for your car. Meaning you would have been driven into bankruptcy. Luckily for its users, Bitcoin never really took off as a currency, so their debts are in much more stable national currencies. But as you see with Fred Wilson, many experience sharp regret for the times they did use it as a currency.

wpietri 9y ago

The difference is definitely not semantic when we are discussing the utility of a technology for a given use case. It's like saying all computers are basically the same -- which they are -- and then going on to conclude desktops and smartphones and rack-mounted servers are all interchangeable. Bitcoin may be a great investment asset. Time will tell. But its deflationary nature and its high volatility make it a bad currency. That's in obvious contrast to the original intention, which was a "purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

hndamien 9y ago
Why is deflation bad?
- wpietri 9y ago
  Deflation is bad for a currency because it means the currency will be worth more later. People hold on to things that they think will be more later. Currency, though, should be something people are comfortable spending. See here, for example, for a prominent Bitcoin advocate explaining that he no longer uses it as a currency: http://avc.com/2017/08/store-of-value-vs-payment-system/ http://avc.com/2017/08/store-of-value-vs-payment-system/ This is especially a problem when a currency is used by a lot of people. It discourages economic activity and increases the value of debt. Imagine, for example, that you had taken out a Bitcoin-denominated car loan on Jan 1 2016 with a monthly payment of 1 BTC. That's about $440 at the time, or 15 hours at the median US wage. Now you'd have to work 40x as much to cover the loan payment, or about 20 hours a day just for your car. Meaning you would have been driven into bankruptcy. Luckily for its users, Bitcoin never really took off as a currency, so their debts are in much more stable national currencies. But as you see with Fred Wilson, many experience sharp regret for the times they did use it as a currency.