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> Nothing can grow at such an insane rate and be a stable, long-lasting thing. That sounds like common sense, but common sense is not neccessarily right. Imag

> Nothing can grow at such an insane rate and be a stable, long-lasting thing. That sounds like common sense, but common sense is not neccessarily right. Imagine a German in the 1920s looking at the price of US dollars in Reichsmark. That can't be true, $1 for 1000 RM? Now 10000 RM? Nothing can grow at such an insane rate. Surely there is a dollar bubble, and it is going to crash. What our German friend didn't realize was that his own currency was (hyper-)inflatory. USD were not overvaluated, they were stable. The current situation is similar, except instead of our currency being inflatory, the other one is being deflatory - this has the same effect on the exchange rate. It does not neccessarily mean there is tulip fever going on (although, to be honest, I can't disprove that).

akhatri_aus 9y ago
Why aren't scarce resources like gold and oil going up the same way? I think gold made a low this week. Your theory doesn't align with what happened in Germany.
- scrumper 9y ago
  Exactly. That German person could have bought a loaf of bread in the morning for RM1,000 then sold it to his neighbor in the afternoon for RM10,000. There are no citizens in Bitcoinland dealing with inflationary prices in virtual bread. Anything you can buy with Bitcoin is priced in fiat, denominated in BTC at whatever the spot rate of the moment happens to be. EDIT: > What our German friend didn't realize was that his own currency was (hyper-)inflatory. He absolutely did. Just like Zimbabweans did more recently.
- captainmuon 9y ago
  Gold is not growing in demand, and is not in the process of being "established". Almost everybody who wants gold already has enough, and people entering the gold market are approximately balanced by people selling gold. People who use gold (e.g. in industry) are supplying themselves at the same rate as they are using it. There is no reason it should continuously go up. Of course my argument doesn't align with what happened in Germany, that is my point. What I am trying to say is what seems at first glance like an overvaluation or a bubble could actually be in-/deflation, or in other words: currency supply and demand. If you assume bitcoin eventually becomes as big as a typical national currency, it is currently even undervalued.
  - akhatri_aus 9y ago
    For the theory to hold though, everything needs to go down in dollars. That's the point. If Bitcoin is the only thing going up there are no deflationary or inflationary forces at work.
    - captainmuon 9y ago
      You're right, there are not deflationary or inflationary forces at work. What is happening is simply supply and demand. I'm thinking in a simple two-goods model here. "Currency" vs. "Products" - or "USD" vs "BTC". "Too much" supply of currency or "too little" supply of physical products drives the price up. In this model, that's the same as inflation, but you are right, as soon as there is a third good you can compare prices to that good and tell if it is inflation (all prices rise) or not (only the price of one good rises). My point is not "it is inflation". Rather "it is inflation-deflation-supply-demand" (market reacting to changing supply and demand), as oppossed to "it is irrationality". If bitcoin is staying with us, and not banned etc., then demand for it will continue to grow faster than the supply will grow. I think the stable exchange rate of a fully established bitcoin will actually be at least a factor of ten higher than today.

akhatri_aus 9y ago

Why aren't scarce resources like gold and oil going up the same way? I think gold made a low this week. Your theory doesn't align with what happened in Germany.

scrumper 9y ago
Exactly. That German person could have bought a loaf of bread in the morning for RM1,000 then sold it to his neighbor in the afternoon for RM10,000. There are no citizens in Bitcoinland dealing with inflationary prices in virtual bread. Anything you can buy with Bitcoin is priced in fiat, denominated in BTC at whatever the spot rate of the moment happens to be. EDIT: > What our German friend didn't realize was that his own currency was (hyper-)inflatory. He absolutely did. Just like Zimbabweans did more recently.
captainmuon 9y ago
Gold is not growing in demand, and is not in the process of being "established". Almost everybody who wants gold already has enough, and people entering the gold market are approximately balanced by people selling gold. People who use gold (e.g. in industry) are supplying themselves at the same rate as they are using it. There is no reason it should continuously go up. Of course my argument doesn't align with what happened in Germany, that is my point. What I am trying to say is what seems at first glance like an overvaluation or a bubble could actually be in-/deflation, or in other words: currency supply and demand. If you assume bitcoin eventually becomes as big as a typical national currency, it is currently even undervalued.
- akhatri_aus 9y ago
  For the theory to hold though, everything needs to go down in dollars. That's the point. If Bitcoin is the only thing going up there are no deflationary or inflationary forces at work.
  - captainmuon 9y ago
    You're right, there are not deflationary or inflationary forces at work. What is happening is simply supply and demand. I'm thinking in a simple two-goods model here. "Currency" vs. "Products" - or "USD" vs "BTC". "Too much" supply of currency or "too little" supply of physical products drives the price up. In this model, that's the same as inflation, but you are right, as soon as there is a third good you can compare prices to that good and tell if it is inflation (all prices rise) or not (only the price of one good rises). My point is not "it is inflation". Rather "it is inflation-deflation-supply-demand" (market reacting to changing supply and demand), as oppossed to "it is irrationality". If bitcoin is staying with us, and not banned etc., then demand for it will continue to grow faster than the supply will grow. I think the stable exchange rate of a fully established bitcoin will actually be at least a factor of ten higher than today.