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I hate that people treat currencies as an "investment". In my mind, crypto concurrency is the perfect value-store (like gold used to be), not an appreciating as

by umvi 7y ago

I hate that people treat currencies as an "investment". In my mind, crypto concurrency is the perfect value-store (like gold used to be), not an appreciating asset. Yet because people treat it like stocks, it behaves like stocks.

fortran77 7y ago
If I bought and sold gold or British Pounds, I'd still be subject to taxes on my gains. I'm not sure I see your point.
- jobigoud 7y ago
  TIL when you convert back and forth foreign currency, you have to declare capital gains. I'm not sure a lot of people realize it either.
  - fortran77 7y ago
    I think people who trade foreign money as an investment strategy realize this.
    - jobigoud 7y ago
      Probably, yes. But everyone else is still subject to this law. For example the UK pound may or may not go down in value in case of hard brexit, if a brit had some euros stashed and the pound crashed, they would have to pay capital gains when exchanging their euros back into pounds.
      - NikkiA 7y ago
        Unless the total value is under £6000. Important to make sure not everyone panics about the €500 they brought back from their holiday :)
jandrese 7y ago
Isn't the idea of gold as a good store of value that it's price doesn't change rapidly over time, allowing you to ride out downturns by converting your money into something that can't be dragged down as quickly as other forms of investment. Cryptocurrencies seem to offer the exact opposite experience. Wild swings in value that are extremely difficult to predict and may or may not follow other markets.
- ISL 7y ago
  The idea, your mileage may vary, is that gold's value in, say, hamburgers may fluctuate less than fiat currency. In the strongest gold-bug case, one might argue that a loss of trust in the dollar could make an ounce of gold worth more hamburgers than it could be traded for today. If preserving value, priced in dollars, is your only goal, holding dollars is guaranteed lossless (modulo tiny costs).
pjc50 7y ago
If it's a store of value, then the value of that value can go up and down relative to the rest of the economy. Just like gold does. (Money supply is not the only factor in price level, despite what everyone seems to think in crypto space)
- saalweachter 7y ago
  It's always fun to try to convince people there is no such thing in nature as a perfect store of value. Houses decay, land can erode or land uses can shift destroying the social value. If your friend asks you to help him move, next week he'll return the favor, but try going back after not talking to him for thirty years and cashing that favor it.
deleted 7y ago
[deleted]
quickthrower2 7y ago
I’m not sure there can ever be a perfect value store. Because such a store is a future promise to “look after you”, but the world is so damn unpredictable! Food prices could soar, land prices too, etc. How does the perfect value store keep up or know what will happen? The impression I get is you need to invest in things that are short term risky and long term safeish like stocks to even attempt to store value. If you look at how pensions are usually reallocated from stocks to cash as you near retirement this is a clue. But even then who is to say the ratio of Vangard to 1 months rent or 1000 calories of nutritious food will be the same in 20 years time? Gold hasn’t performed too well over the last few years by the way.
- ISL 7y ago
  A die-hard indexer would suggest that, if you could, you would want to own uniform (cap-weighted) amounts of every type of asset to ensure getting exactly average performance.
cheald 7y ago
Crypto like bitcoin is necessarily an appreciating asset because it is deflationary by its very nature. Over a long enough time period, if BTC were in fact behaving like a currency (that is, as a medium for the exchange of value, rather than a store of value) the value of BTC as expressed in exchangable goods must rise, unless the global production of goods contracts, and there is no reason to expect that to happen. Just like any other good, there is a fluid rate of demand for money. If the supply of money is unable to increase with the demand for money, the relative value of the money increases. This is exactly why USD is a poor store of value (it reliably depreciates by 1-3% annually) and a good currency (well-managed supply vs demand results in long-term predictability about the value of 1 USD, making it reliable to transact in).
- MereInterest 7y ago
  >Crypto like bitcoin is necessarily an appreciating asset because it is deflationary by its very nature. That assumes that the demand for cryptocurrencies remains constant. If the demand for cryptocurrencies drops faster than the deflation of the currency, then the value goes down.
  - cheald 7y ago
    Absolutely! My point is that it's ill-suited to be a currency because we know now that stable currencies need to be able to match supply to demand. Because of crypto's fixed supply, it behaves more like an asset (though it certainly need not be an appreciating asset). Overall, I believe that a successful crypto will behave more like an asset than a currency. The failing ones are just dust.

by umvi 7y ago

fortran77 7y ago

If I bought and sold gold or British Pounds, I'd still be subject to taxes on my gains. I'm not sure I see your point.

jobigoud 7y ago
TIL when you convert back and forth foreign currency, you have to declare capital gains. I'm not sure a lot of people realize it either.
- fortran77 7y ago
  I think people who trade foreign money as an investment strategy realize this.
  - jobigoud 7y ago
    Probably, yes. But everyone else is still subject to this law. For example the UK pound may or may not go down in value in case of hard brexit, if a brit had some euros stashed and the pound crashed, they would have to pay capital gains when exchanging their euros back into pounds.
    - NikkiA 7y ago
      Unless the total value is under £6000. Important to make sure not everyone panics about the €500 they brought back from their holiday :)

jandrese 7y ago

Isn't the idea of gold as a good store of value that it's price doesn't change rapidly over time, allowing you to ride out downturns by converting your money into something that can't be dragged down as quickly as other forms of investment. Cryptocurrencies seem to offer the exact opposite experience. Wild swings in value that are extremely difficult to predict and may or may not follow other markets.

ISL 7y ago
The idea, your mileage may vary, is that gold's value in, say, hamburgers may fluctuate less than fiat currency. In the strongest gold-bug case, one might argue that a loss of trust in the dollar could make an ounce of gold worth more hamburgers than it could be traded for today. If preserving value, priced in dollars, is your only goal, holding dollars is guaranteed lossless (modulo tiny costs).

pjc50 7y ago

If it's a store of value, then the value of that value can go up and down relative to the rest of the economy. Just like gold does. (Money supply is not the only factor in price level, despite what everyone seems to think in crypto space)

saalweachter 7y ago
It's always fun to try to convince people there is no such thing in nature as a perfect store of value. Houses decay, land can erode or land uses can shift destroying the social value. If your friend asks you to help him move, next week he'll return the favor, but try going back after not talking to him for thirty years and cashing that favor it.

deleted 7y ago

[deleted]

quickthrower2 7y ago

I’m not sure there can ever be a perfect value store. Because such a store is a future promise to “look after you”, but the world is so damn unpredictable! Food prices could soar, land prices too, etc. How does the perfect value store keep up or know what will happen? The impression I get is you need to invest in things that are short term risky and long term safeish like stocks to even attempt to store value. If you look at how pensions are usually reallocated from stocks to cash as you near retirement this is a clue. But even then who is to say the ratio of Vangard to 1 months rent or 1000 calories of nutritious food will be the same in 20 years time? Gold hasn’t performed too well over the last few years by the way.

ISL 7y ago
A die-hard indexer would suggest that, if you could, you would want to own uniform (cap-weighted) amounts of every type of asset to ensure getting exactly average performance.

cheald 7y ago

Crypto like bitcoin is necessarily an appreciating asset because it is deflationary by its very nature. Over a long enough time period, if BTC were in fact behaving like a currency (that is, as a medium for the exchange of value, rather than a store of value) the value of BTC as expressed in exchangable goods must rise, unless the global production of goods contracts, and there is no reason to expect that to happen. Just like any other good, there is a fluid rate of demand for money. If the supply of money is unable to increase with the demand for money, the relative value of the money increases. This is exactly why USD is a poor store of value (it reliably depreciates by 1-3% annually) and a good currency (well-managed supply vs demand results in long-term predictability about the value of 1 USD, making it reliable to transact in).

MereInterest 7y ago
>Crypto like bitcoin is necessarily an appreciating asset because it is deflationary by its very nature. That assumes that the demand for cryptocurrencies remains constant. If the demand for cryptocurrencies drops faster than the deflation of the currency, then the value goes down.
- cheald 7y ago
  Absolutely! My point is that it's ill-suited to be a currency because we know now that stable currencies need to be able to match supply to demand. Because of crypto's fixed supply, it behaves more like an asset (though it certainly need not be an appreciating asset). Overall, I believe that a successful crypto will behave more like an asset than a currency. The failing ones are just dust.