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What's the point of an unstable, volatile, frantically manipulated currency that is susceptible to social media pump and dump schemes (Elon + Doge)? Currency a

What's the point of an unstable, volatile, frantically manipulated currency that is susceptible to social media pump and dump schemes (Elon + Doge)? Currency and its exchange rate needs to be relatively stable for the world to put trust into it. Saying that BTC is stable, but the rest of the world's fiat currency is fluctuating makes no sense. US dollar provides stability and security, I feel confident that a cappuccino will cost me $4. Crypto's volatility deters me from using it, simply put. There is no buffer that you would have with a Treasury. Converting from BTC to coffee makes BTC exchange rate go down.

scsilver 6y ago
These currencies will inflate in value as their network grows wider. Each new user adds value like a telephone network. Eventually, there will be a point where everyone who wants to be connected is connected, they have bought the bitcoin they want and bitcoin prices reach an steady state. At that point, it should be stable enough to use as a currency.
- PragmaticPulp 6y ago
  It’s fascinating to watch MLM logic sweep the tech world. Get in on the ground floor of this opportunity, then convince all of your friends to buy in, then they convince all of their friends... Once the speculation upside is gone, why would anyone want to buy Bitcoin? That’s the real question.
  - centimeter 6y ago
    MLM dynamics actually do apply to monetized assets in some cases. Cf. “Bubble Theory Of Money”, Gresham’s Law. Once the speculation upside is gone, you would use Bitcoin because it’s the best available reserve and settlement asset. What are your other options? Inflationary USD or Yuan? Few rational actors would prefer to hold those.
    - ForHackernews 6y ago
      > Inflationary USD lolz https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi https://www.macrotrends.net/countries/USA/united-states/infl...
      - centimeter 6y ago
        CPI is a joke of a metric. Very few economists take it seriously.
        ForHackernews 6y ago
        What metric would you prefer?
        trhway 6y ago
        my favorite is M3 https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Edit: I thought it was obvious, yet in response to comment below - theoretically to get real inflation one has to adjust the M3 for the growth of the total amount of "stuff" in the economy. As that growth is just 1-2%/year , the M3 shape is visually indistinguishable from the real inflation on any given time period of up to several years.
        ForHackernews 6y ago
        That's not a measure of inflation, it's just a measure of money supply.
        georgeplusplus 6y ago
        inflation is defined as expansion or contraction in the money supply
        ForHackernews 6y ago
  - scsilver 6y ago
    Its not MLM its network effects. Every node added to a transactional network adds real world value to that network. Its etreamly evident in telephone networks. The reason people would want to buy bitcoin once it has grown out of its speculation is the vast marketplace of people and vendors who accept bitcoin as tender + the use of bitcoin as a hedge against the inflation of your local fiat currency. It becomes another investment vehicle to diversify with.
mlthoughts2018 6y ago
If you live in a situation where the only local fiat currency is even worse, then the “volatility fee” of cryptocurrency may be well worth the money to decouple yourself from that bad fiat currency risk. Maybe you can purchase things directly with the cryptocurrency, or maybe you just wait until you can drive across the border to a place with more stable fiat currency, sell cryptocurrency for that currency, and buy milk. Simple currency exchange or traditional custodial stores of value like precious metals wouldn’t work, since you’re still beholden to the original fiat currency problem. At any given time, some small slice of world currency demand will be focused on this “protection from unstable fiat currency” and some other small slice would be like a prepper mindset hedging their perceived risk of facing that (eg “but what if the US dollar collapses?” from people with very extreme risk aversion preferences). That total “market cap” demand for cryptocurrency will surely be way, way lower than traditional fiat currencies, but it may still be much higher than the current total market cap for crypto, which means there is room for completely rational speculative buying and holding of crypto, depending on your outlook and risk preferences, for perfectly sound reasons. I highly doubt Bitcoin is ever going to become a major direct medium of exchange. But also it does not need to become that. It can offer big value in a lesser role that would still justify speculative buying of crypto today.
- PragmaticPulp 6y ago
  If someone is in a country with a collapsing local currency, they still have to transfer that money to a Bitcoin exchange before they can transfer the Bitcoin. If the currency is collapsing, who’s going to trade Bitcoin for the collapsing currency? That’s the necessary first step in this process. If I’m just trying to cross the border with Bitcoin in my mind wallet so I can convert it back to cash on the other side, why does it matter if 1 BTC is $10 or $10,000,000? It doesn’t, because moving money round-trip through a currency is a matched pair of buy and sell trades in a short period. Net zero, long term. This narrative that Bitcoin is somehow going to save refugees from oppressive governments is possible, but deeply flawed in practice. Either way, it’s not a long term driver of demand. Frankly, it’s far more likely that the dictators of such countries would use Bitcoin to flee the country with their citizen’s money and avoid prosecution than the other way around.
kungito 6y ago
But did you ever wonder where the stability of USD comes from? It all comes down to how big the transaction volume of your currency is. Things like "Petrodollar" https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodollar_warfare https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodol... increase the volume and provide additional stability. As "market cap" of bitcoin increases, so does the stability. All things considered, bitcoin still is very bad because of the transaction throughput which still remains an unsolved problem. I don't see how arbitrage can happen on the price if the transactions are so expensive. I guess BTC will end up living in the various exchange siloses
- rokobobo 6y ago
  Did you mean "market share" (as in, notional share of all transactions) as opposed to "market cap" (as in, the sum of all bitcoin supply, multiplied by the current price)?
- ardy42 6y ago
  > But did you ever wonder where the stability of USD comes from? It all comes down to how big the transaction volume of your currency is. I don't think it's that simple. Transaction volume doesn't just appear from nowhere. IMHO, the stability of the US dollar mainly comes from the geopolitical & economic position of the US coupled with trust that its government won't totally mismanage it. Bitcoin has neither of those things and never will.
  - centimeter 6y ago
    > Transaction volume doesn't just appear from nowhere. Indeed, it takes time to bootstrap a currency. That’s why it’s absurd to expect Bitcoin to be stable when it’s less than 10% the market cap of any other significant reserve asset, and may plausibly keep increasing its dominance in the reserve asset market. > Bitcoin has neither of those things and never will. I disagree - I trust much more strongly that Bitcoin will not be mismanaged than the USD, because bitcoin is governed by very simple and utile rules that are practically impossible to change, whereas the USD can be and has been inflated substantially. I don’t think your first point (the economic position of the US) is as important as you think, especially as Bitcoin comes to be the reserve asset of a larger and larger set of productive economic actors.
janoside 6y ago
What's the point, you ask... Here is Ross Stevens, CEO of Stone Ridge Asset Management, describing "the point" for an hour: https://www.microstrategy.com/en/bitcoin/videos/bitcoin-macro-strategy https://www.microstrategy.com/en/bitcoin/videos/bitcoin-macr... It sounds like you've made up your mind about Bitcoin, but I believe you've missed the big picture. The above video, if you watch it with an open mind, will help you to glimpse it. Hint: it's not about cappuccino, it's about living in a world of competitively devaluing currencies and resulting asset inflation.
- arcticbull 6y ago
  You haven't shared "the point" just a link to MicroStrategy, a failed software company whose CEO had to pay an $11 million dollar SEC settlement decades ago for cooking the books, making a desperate Hail Mary play buying near the top of a speculative mania in a bid to gain relevancy. MSTR is the new "Long Island Iced Tea" -> "Long Blockchain Inc" rebrand [1] Humorously enough, the same is roughly true of Tesla, a car company which sells 5% as many cars at Toyota while valued about twice what the entire rest of the car market put together is worth. Their only source of profit is selling carbon credits to traditional automakers who won't need them anymore as they're all moving electric too. One more Hail Mary distraction to maintain the one thousand three hundred P/E ratio. In a manufacturing business. Not software with zero marginal cost. Manufacturing. The industry average P/E is right around 15. > ...it's about living in a world of competitively devaluing currencies and resulting asset inflation. Currency is an intentionally-lossy temporary store of value. It only needs to hold its value for as long as it takes you to buy assets with them. At 2% inflation it does. Anything else is a straw-man you'd recognize if you attended ECON 101. Asset inflation isn't inflation, it's an ROI. CPI is inflation. This is a typical set of r/Bitcoin talking points that are easily debunked. [1] https://qz.com/1659246/the-fbi-wants-more-information-about-long-blockchain/ https://qz.com/1659246/the-fbi-wants-more-information-about-...
  - throwaway20875 6y ago
    >CPI is inflation Lol
X6S1x6Okd1st 6y ago
It's kind of moot w.r.t. MasterCard. They will only accept stablecoins which are generally pegged to usd
- toomuchtodo 6y ago
  Someone’s bonus and job depends on them appearing “innovative”.
- systemvoltage 6y ago
  This is an important point I missed, thanks. I am totally on board a pegged crypto currency that tracks US dollar. For me and many others I presume, stability is far more important than anything else that crypto currencies have to offer.
  - X6S1x6Okd1st 6y ago
    Well there are certainly plenty to choose from, the major downside to stablecoins is that you need to place trust in the mechanism that ensures they are actually stable. Tether is the biggest one and it's pretty unclear whether they are trust worthy. IMO one of the most important properties of cryptocurrencies is that you only need to place trust in the code & that the miners are selfish.
    - AgentME 6y ago
      Not to invalidate your point, but Tether is a particularly untrustworthy example. USDC is another centralized stablecoin that's more transparently managed than Tether, and then DAI is a decentralized stablecoin that keeps its value through a smart contract that manages collateral and minting in order to keep its value steady.
- graeme 6y ago
  Like Tether? They’re currently in the middle of a fraud case alleging they are not at all backed by USD and thus the peg is supported by fiat and liable to fall off. (I mean this in the dictionary sense of the word fiat that gives meaning to the phrase fiat currency. I don’t mean tether is supported by fiat currency)
GrumpyNl 6y ago
Marketing and marketing, jump the bitcoin bandwagon.
krisdol 6y ago
Full disclosure: I own about $11 worth of bitcoin if I round up a bit, so this might be biased. The most convincing "point" of bitcoin I've heard is to accomodate transfer of large sums of money across borders, quickly, with minimal transaction costs and oversight. Everyone here can afford the fee to transact 8 billion dollars worth of bitcoin. And settlement happens in seconds to a couple minutes. That's appealing to people trying to move millions or billions of dollars around.
- systemvoltage 6y ago
  That’s the thing. By the time the transfer takes place, BTC exchange rate is now 7% off. How convenient is the transfer mechanism when the underlying is a speculative instrument? Until BTC exchange rate gets stable or gets pegged do the ground, it’s gonna float around in the air of extreme volatility and manipulation - pretty risky adventure to transfer large sums of money.
  - panarky 6y ago
    I prefer to own an asset with high volatility that gets more valuable over time than an asset with low volatility that gets less valuable over time.
    - adventured 6y ago
      You're talking about something entirely different from what the parent comment is. What you're talking about is a long-term investment.
    - edgyquant 6y ago
      We aren’t talking about assets and what you’ve just said is the reason we have controlled inflation. Currency isn’t supposed to incentivize hoarding it, quite the opposite in fact.
      - vntok 6y ago
        Not everyone agrees with that view. I for one would rather people spent their hard-earned money in a smart, slow and well-thought way than feel compelled by inflation to do so fast and lose.
fouldiplomacy 6y ago
"unstable, volatile, frantically manipulated currency" -- this is often the case with any news, not just "pump and dump" schemes. Take the Chinese CNY. The CCP have been undervaluing it for years for the purpose of attracting business. the USD is very much subject to social media and traditional news manipulation. When the US decides it wants a stimulus package or other types of debt, it drives down the dollar's value. Granted the US is good about making payments to creditors, i.e bonds, it is not immune to fluctuation. It is sad but the way of the dollar is slipping and the global demand currency. It is slowly being replaced by the CNY and other market demands. Lastly, the Treasury does not control the dollar. It the Foreign exchange markets. (https://www.fool.com/knowledge-center/who-determines-the-value-of-the-us-dollar.aspx https://www.fool.com/knowledge-center/who-determines-the-val...)
- mdtusz 6y ago
  USD price does fluctuate and inflate over time yes, but the difference is that this is essentially an invisible effect on day to day life for anyone that is not doing forex trading. The reason the US dollar is "stable" is partially due to the fact that it is backed by the US government. It is a requirement that businesses operating in the US accept payment in US dollars. Until somewhere mandates that bitcoin _must_ be accepted, it will never truly be a currency, the same way that gold is not a currency, and the same way that wheat, or potash, or shares in GME is not a currency. There's also a concept of "sticky" prices that most economists are quite familiar with - this assists in keeping the price of a coffee stable, whether or not technophiles accept it or not. Even if the price of the US dollar fell by 50% today, your coffee would still cost you around $2 or $3 tomorrow (assuming the coffee shop was even open).
  - ggreer 6y ago
    > It is a requirement that businesses operating in the US accept payment in US dollars. People and businesses in the US have to pay the US government in US dollars, but there's no law requiring that a business accept any particular currency.[1][2] That said, if you do try to make your own currency, the feds will find some way to shut you down.[3] 1. https://www.federalreserve.gov/faqs/currency_12772.htm https://www.federalreserve.gov/faqs/currency_12772.htm 2. https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx https://www.treasury.gov/resource-center/faqs/Currency/Pages... 3. https://www.forbes.com/sites/nathanlewis/2017/04/18/what-is-a-legal-tender-law-and-is-it-a-problem/ https://www.forbes.com/sites/nathanlewis/2017/04/18/what-is-...
centimeter 6y ago
It’s reasonable to expect the value of Bitcoin to stabilize as it becomes a more popular store of value. The US dollar provides stability and security over a very short timescale. It’s been inflating for decades (punishing dollar holders and waged/salaried workers) and based on the current political environment (insane dollar printing, “MMT” having political currency, etc.) there’s a substantial risk of serious dollar instability in the next few decades.
koonsolo 6y ago
With any fiat currency, you are indeed aware that it devalues at a steady pace.
tgraves83 6y ago
I agree that paying for things directly with bitcoin doesn't make sense. However, that doesn't mean bitcoin doesn't have a use case as a global settlement network and volatility isn't what's important, it's liquidity, which bitcoin has far more of then any other cryptocurrency. For an example of this take a look at something like Strike Global using bitcoin's lightning network. https://jimmymow.medium.com/announcing-strike-global-2392b908f611 https://jimmymow.medium.com/announcing-strike-global-2392b90...
- tw04 6y ago
  >it's liquidity, which bitcoin has far more of then any other cryptocurrency. "Far more of than any other cryptocurrency" is kind of a moot point. Does "bitcoin" (the people converting it to cash) have enough reserves in any real currency to cover even 10% of its value? There's no federal government backing it, and as best I can tell nothing to prevent the proverbial "run on the bank". I still struggle to see how bitcoin has anymore intrinsic value than collecting pokemon cards. It's worth something right up until it isn't without a major government supporting it.
  - tgraves83 6y ago
    It doesn't sound like you bothered reading the link I posted. Price volatility caused by a "run on the bank" doesn't really matter if you are sending payments between two people using different currencies. The link I posted describes an app that as an example allows a payment to be sent from someone in the US to someone in Europe and have it settled instantly. Bitcoin is only used on the end of each transaction and converted in and out of dollars and euro's instantaneously making it's price irrelevant. The intrinsic value argument is old and tired at this point so I'm not even going to bother with it. Yes, Bitcoin at this stage is extremely volatile and anyone buying it to hold as an investment should understand it can lose or gain a lot of value quickly. However, it does have multiple use cases at this point that clearly the market has determined have some type of value. We're still figuring that out. As a side note, if you do some digging you can find some pretty good on-chain analytics that can theoretically put a sort of floor on the price based on how coins have moved over time. There are now quite a few sites like glassnode.com, cryptoquant.com, coinmentrics.io etc that provide this data or if you are technical enough set up your own node and verify it for yourself.
vbezhenar 6y ago
Your view must be skewed by privilege of having stable currency. Currency of my country lost 250% of its value over last 7 years. It's not bitcoin-level volatile, but close to it. Thankfully I have an option to use USD to hoard money, but that option is not something that's given, in many countries you just can't exchange for fair price. I agree that for someone living in US or EU there's no much point using BTC.
- deleted 6y ago
  [deleted]
- tenaciousDaniel 6y ago
  It's sad that this aspect of the conversation so often gets replaced by everything else. This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. We're still not there, but that should be the north star for crypto (again, in my opinion).
  - sorbits 6y ago
    Normally the government leverages its power to keep its currency stable. If a country fails at that, the residents tend to switch to another country’s currency, for example USD is widely accepted in countries with unstable currencies, and this makes sense, since a lot of commodity prices are set in USD. What we have seen with crypto currencies are extreme volatility, not useful to base a country’s economy on, and because it is decentralized, no-one can really intervene to control this volatility, by e.g. changing the interest rate, and nothing is priced in crypto currencies, to sort of keep it tied to something. The only metric for what a coin should cost seems to be the electricity/leasing of computers required to mine one. But even this metric is not good, as it is proportional to the size of the network, which is not a constant, and is likely to grow, as the price goes up.
    - lazide 6y ago
      Devils advocate - it is possible the large swings are also because it does not have the counterbalancing effect of a large economy on it, and as it gets used more often that will change. Being able to buy something I want today, because the price went up from yesterday, or saving today when I would have spent, because the price has dropped today causes a regulating effect. Right now the usage of it is low, small changes in this equation have an outsized effect.
waprin 6y ago
I used to think cryptocurrency was a solution in search of a problem, but the Robinhood fiasco has made me think otherwise. I find their clearing house explanation woefully insufficient in details, and open to the possiblity of being technically the truth but misleading (for example, they gave mass margin to lots of new accounts so they technically lacked collateral, but if they stopped new signups then cleared cash non-margin accounts would have been able to freely trade). Some might call me a conspiracy theorist, but the fact remains there’s no good way to verify any of what they’re telling us is true, other than to trust people with billion dollar reasons to mislead, or rely on an SEC which has repeatedly failed to do its job and stand up to big institutions (see Moody’s subprime ratings, or Robinhood already getting fined by SEC but for trivial amounts). There’s certainly pump and dumps, fraud and manipulation in crypto, but some could argue a lot of stocks exist right now with terrible fundamentals but huge market caps that nobody labels a pump and dump because “serious” institutions say the valuations are “forward looking.” All this is to say, finance is a game with massive incentives to deceive and manipulate. We see that in the traditional finance space and in the crypto space . But long term, Id argue in many ways the decentralized nature of crypto lends itself to far more transparency than our traditional systems. Now, that doesn’t mean it makes sense to buy coffee with crypto, or that a specific coin is the solution, especially one with the type of technical challenges BTC has. But in a broader sense, I do think decentralized finance is starting to look more and more like the future, if the alternative is to continually put trust into institutions that repeatedly betray that trust.
- deleted 6y ago
  [deleted]
- anythingdude321 6y ago
  so nice to see the hackernews crowd finally figuring it out! i totally agree with you. i feel that if you keep digging, you'll find yourself convinced over time that BTC's "technical challenges" are not the flaws that they originally appear, and that in the long run crypto does make sense as a currency itself, in addition to a financial infrastructure.
- nexthash 6y ago
  Call me back when crypto is being used for anything normal - buying groceries, homes, pay checks, etc rather than trading and speculation. As of now, if my job attempts to pay me in DogeCoin I will quit and file a complaint with the NLRB. The thing is, no matter how much you think the current financial system is crooked, there is always a way to settle disputes through courts and regulators. The worst financial hiccups happen in areas without regulation. There were no rules on selling subprime mortgages or shorting more stock than exists, but unlike in the cryptoverse if something blows up it can be patched with legislation and restitution to victims. If your crypto gets stolen or a coin gets pumped and dumped, there is no recourse. With no connection to the real world comes no trust and no mercy.
kolinko 6y ago
The value is in ease of use for some cases. Or, in other words, what’s the point of having a stable currency if you can’t use it in smart contracts?
deevolution 6y ago
How can you possibly back up the claim that the USD is stable? My grandparents were able to buy several acres of land and build a house for 80k in the 1970s. Doing the same today costs 500k+!!! It's completely outrageous. Ths USD is far from stable and anyone who thinks so is either insanely privileged or ignorant!
- lxgr 6y ago
  Predictable inflation is a form of stability.
  - Erlich_Bachman 6y ago
    "I would choose a volatile 200% increase over a year than a stable predictable 10% decrease." Michael J. Saylor
    - lxgr 6y ago
      Is this for an investment or a currency? There's a reason there is both.
- dkersten 6y ago
  Because the cappuccino will continue to cost them $4 tomorrow, next week and next month. Sure, its value changes and a cappuccino may even cost a different amount sometime in the future, but its easy to know the value of the money you have because the exchange rate between dollars and items in the shop doesn't change so much. Contrast that with bitcoin, where the value often changes by many, many cappuccino's in a single day.
  - Geee 6y ago
    You can choose to become poor slowly or to get rich slowly. The short-term volatility doesn't matter in the long run.
    - lmm 6y ago
clusterfish 6y ago
The point is money laundering. Why do you think cryptocurrencies are still legal? Politicians need it.
MichaelBurge 6y ago
Volatility is a non-issue with the release of CME futures. You can short Bitcoin or Ethereum futures to lock in your price with respect to USD at any time. The base futures contracts are 5 Bitcoin i.e. notional value of $200k, but that's merely an inconvenience and not a fundamental blocker to subdivide the futures contract or have someone do it for you. I think for years payment companies like Bitpay have had price guarantees for merchants(probably using futures in the backend), but you do have more counterparty risk dealing with unregulated exchanges.
lui8906 6y ago
> Crypto's volatility deters me from using it, simply put. There is stable coins which have held a consistent peg against the US dollar for a couple of years now. You get all the benefit of high APY yield (relative to a bank account) and none of the volatility of a Doge or a BTC.
- lottin 6y ago
  You can be certain that an investment opportunity is a scam when it promises above-market returns with no additional risk.
  - deeeeplearning 6y ago
    Savings Account APY != Market Returns. Fyi
reedjosh 6y ago
>What's the point of an unstable, volatile, frantically manipulated currency that is susceptible to social media pump and dump schemes (Elon + Doge)? BTC is only volatile as not enough people use it. Further, if you stay on USD, every year a cappuccino will cost you more. Fractional reserve banking is practically a license to print USD. We're not funding the stimulus or really any of our government via tax anymore. Inflation is the real tax.
denkmoon 6y ago
Really the only time you want to actually spend crypto is for regulated items. Porn + sex related items, and drugs. Maybe firearms and illegal information (ie. stolen credit cards, account credentials, malware). This move by MC seems at odds with their recent spat with Pornhub, but I would not be the first to accuse financial organisations of hypocrisy.
hertzrat 6y ago
Investing in Bitcoin seems like investing in GameStop: so many people are obsessed and want in on it but almost nobody really understands what’s going on or why the value is growing. They just want the easy money. Regardless of whether Bitcoin is a good investment or not, this is not a healthy way for an investment market to work
KorematsuFred 6y ago
A lot of currencies in the world are not stable and some are worse than some shitcoin. Also, there are some ridiculous restrictions on what you can do with your own money. For example in India you simply can't leave the country with your money. What are you going to do ? Bitcoin is helpful.
jernejzen 6y ago
You mean stable currency that is supported by 24$ trillion of national debt?
chemmail 6y ago
Typical worldview of a frog in a well.
twaybtclong 6y ago
I had 2% of my net worth in currencies subject to social media pump and dump schemes. It ballooned to 100% and now I have airplanes and stocks. Is that worth 2% of your net worth? You should read about optionality. You don't have to be poor if you understand risk.
literallycancer 6y ago
scp twice a day to keep the plebs at bay
janeroe 6y ago
> What's the point of an unstable, volatile, frantically manipulated currency I don't know, but for some reason people keep using USD. Even though in the long run BTC keeps growing and USD will only lose its value.
UShouldBWorking 6y ago
You (and most of the world) continues to miss the point of Bitcoin, just read the title of the white paper. It is a digital CASH payments network. This threatens the bankers and government so they have largely coopted the project and twisted Bitcoin Core into some sick settlement layer for their "second layer" products. Real Bitcoin (now called Bitcoin Cash) continues to be stable with low fees and instant transactions.
herbst 6y ago
A coffee in switzerland costs you 5 usd today when it cost 4 usd a few years back. Stable really is relative even with major currencies. I dont hold USD because it relatively loses in value for months and years now.
austhrow743 6y ago
Doing social media pump and dump schemes is fun and sometimes profitable.

scsilver 6y ago

These currencies will inflate in value as their network grows wider. Each new user adds value like a telephone network. Eventually, there will be a point where everyone who wants to be connected is connected, they have bought the bitcoin they want and bitcoin prices reach an steady state. At that point, it should be stable enough to use as a currency.

PragmaticPulp 6y ago
It’s fascinating to watch MLM logic sweep the tech world. Get in on the ground floor of this opportunity, then convince all of your friends to buy in, then they convince all of their friends... Once the speculation upside is gone, why would anyone want to buy Bitcoin? That’s the real question.
- centimeter 6y ago
  MLM dynamics actually do apply to monetized assets in some cases. Cf. “Bubble Theory Of Money”, Gresham’s Law. Once the speculation upside is gone, you would use Bitcoin because it’s the best available reserve and settlement asset. What are your other options? Inflationary USD or Yuan? Few rational actors would prefer to hold those.
  - ForHackernews 6y ago
    > Inflationary USD lolz https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi https://www.macrotrends.net/countries/USA/united-states/infl...
    - centimeter 6y ago
      CPI is a joke of a metric. Very few economists take it seriously.
      - ForHackernews 6y ago
        What metric would you prefer?
        trhway 6y ago
        my favorite is M3 https://fred.stlouisfed.org/series/MABMM301USM189S https://fred.stlouisfed.org/series/MABMM301USM189S Edit: I thought it was obvious, yet in response to comment below - theoretically to get real inflation one has to adjust the M3 for the growth of the total amount of "stuff" in the economy. As that growth is just 1-2%/year , the M3 shape is visually indistinguishable from the real inflation on any given time period of up to several years.
        ForHackernews 6y ago
        That's not a measure of inflation, it's just a measure of money supply.
        georgeplusplus 6y ago
        inflation is defined as expansion or contraction in the money supply
        ForHackernews 6y ago
- scsilver 6y ago
  Its not MLM its network effects. Every node added to a transactional network adds real world value to that network. Its etreamly evident in telephone networks. The reason people would want to buy bitcoin once it has grown out of its speculation is the vast marketplace of people and vendors who accept bitcoin as tender + the use of bitcoin as a hedge against the inflation of your local fiat currency. It becomes another investment vehicle to diversify with.

mlthoughts2018 6y ago

If you live in a situation where the only local fiat currency is even worse, then the “volatility fee” of cryptocurrency may be well worth the money to decouple yourself from that bad fiat currency risk. Maybe you can purchase things directly with the cryptocurrency, or maybe you just wait until you can drive across the border to a place with more stable fiat currency, sell cryptocurrency for that currency, and buy milk. Simple currency exchange or traditional custodial stores of value like precious metals wouldn’t work, since you’re still beholden to the original fiat currency problem. At any given time, some small slice of world currency demand will be focused on this “protection from unstable fiat currency” and some other small slice would be like a prepper mindset hedging their perceived risk of facing that (eg “but what if the US dollar collapses?” from people with very extreme risk aversion preferences). That total “market cap” demand for cryptocurrency will surely be way, way lower than traditional fiat currencies, but it may still be much higher than the current total market cap for crypto, which means there is room for completely rational speculative buying and holding of crypto, depending on your outlook and risk preferences, for perfectly sound reasons. I highly doubt Bitcoin is ever going to become a major direct medium of exchange. But also it does not need to become that. It can offer big value in a lesser role that would still justify speculative buying of crypto today.

PragmaticPulp 6y ago
If someone is in a country with a collapsing local currency, they still have to transfer that money to a Bitcoin exchange before they can transfer the Bitcoin. If the currency is collapsing, who’s going to trade Bitcoin for the collapsing currency? That’s the necessary first step in this process. If I’m just trying to cross the border with Bitcoin in my mind wallet so I can convert it back to cash on the other side, why does it matter if 1 BTC is $10 or $10,000,000? It doesn’t, because moving money round-trip through a currency is a matched pair of buy and sell trades in a short period. Net zero, long term. This narrative that Bitcoin is somehow going to save refugees from oppressive governments is possible, but deeply flawed in practice. Either way, it’s not a long term driver of demand. Frankly, it’s far more likely that the dictators of such countries would use Bitcoin to flee the country with their citizen’s money and avoid prosecution than the other way around.

kungito 6y ago

But did you ever wonder where the stability of USD comes from? It all comes down to how big the transaction volume of your currency is. Things like "Petrodollar" https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodollar_warfare https://en.wikipedia.org/wiki/Petrodollar_recycling#Petrodol... increase the volume and provide additional stability. As "market cap" of bitcoin increases, so does the stability. All things considered, bitcoin still is very bad because of the transaction throughput which still remains an unsolved problem. I don't see how arbitrage can happen on the price if the transactions are so expensive. I guess BTC will end up living in the various exchange siloses

rokobobo 6y ago
Did you mean "market share" (as in, notional share of all transactions) as opposed to "market cap" (as in, the sum of all bitcoin supply, multiplied by the current price)?
ardy42 6y ago
> But did you ever wonder where the stability of USD comes from? It all comes down to how big the transaction volume of your currency is. I don't think it's that simple. Transaction volume doesn't just appear from nowhere. IMHO, the stability of the US dollar mainly comes from the geopolitical & economic position of the US coupled with trust that its government won't totally mismanage it. Bitcoin has neither of those things and never will.
- centimeter 6y ago
  > Transaction volume doesn't just appear from nowhere. Indeed, it takes time to bootstrap a currency. That’s why it’s absurd to expect Bitcoin to be stable when it’s less than 10% the market cap of any other significant reserve asset, and may plausibly keep increasing its dominance in the reserve asset market. > Bitcoin has neither of those things and never will. I disagree - I trust much more strongly that Bitcoin will not be mismanaged than the USD, because bitcoin is governed by very simple and utile rules that are practically impossible to change, whereas the USD can be and has been inflated substantially. I don’t think your first point (the economic position of the US) is as important as you think, especially as Bitcoin comes to be the reserve asset of a larger and larger set of productive economic actors.

janoside 6y ago

What's the point, you ask... Here is Ross Stevens, CEO of Stone Ridge Asset Management, describing "the point" for an hour: https://www.microstrategy.com/en/bitcoin/videos/bitcoin-macro-strategy https://www.microstrategy.com/en/bitcoin/videos/bitcoin-macr... It sounds like you've made up your mind about Bitcoin, but I believe you've missed the big picture. The above video, if you watch it with an open mind, will help you to glimpse it. Hint: it's not about cappuccino, it's about living in a world of competitively devaluing currencies and resulting asset inflation.

arcticbull 6y ago
You haven't shared "the point" just a link to MicroStrategy, a failed software company whose CEO had to pay an $11 million dollar SEC settlement decades ago for cooking the books, making a desperate Hail Mary play buying near the top of a speculative mania in a bid to gain relevancy. MSTR is the new "Long Island Iced Tea" -> "Long Blockchain Inc" rebrand [1] Humorously enough, the same is roughly true of Tesla, a car company which sells 5% as many cars at Toyota while valued about twice what the entire rest of the car market put together is worth. Their only source of profit is selling carbon credits to traditional automakers who won't need them anymore as they're all moving electric too. One more Hail Mary distraction to maintain the one thousand three hundred P/E ratio. In a manufacturing business. Not software with zero marginal cost. Manufacturing. The industry average P/E is right around 15. > ...it's about living in a world of competitively devaluing currencies and resulting asset inflation. Currency is an intentionally-lossy temporary store of value. It only needs to hold its value for as long as it takes you to buy assets with them. At 2% inflation it does. Anything else is a straw-man you'd recognize if you attended ECON 101. Asset inflation isn't inflation, it's an ROI. CPI is inflation. This is a typical set of r/Bitcoin talking points that are easily debunked. [1] https://qz.com/1659246/the-fbi-wants-more-information-about-long-blockchain/ https://qz.com/1659246/the-fbi-wants-more-information-about-...
- throwaway20875 6y ago
  >CPI is inflation Lol

X6S1x6Okd1st 6y ago

It's kind of moot w.r.t. MasterCard. They will only accept stablecoins which are generally pegged to usd

toomuchtodo 6y ago
Someone’s bonus and job depends on them appearing “innovative”.
systemvoltage 6y ago
This is an important point I missed, thanks. I am totally on board a pegged crypto currency that tracks US dollar. For me and many others I presume, stability is far more important than anything else that crypto currencies have to offer.
- X6S1x6Okd1st 6y ago
  Well there are certainly plenty to choose from, the major downside to stablecoins is that you need to place trust in the mechanism that ensures they are actually stable. Tether is the biggest one and it's pretty unclear whether they are trust worthy. IMO one of the most important properties of cryptocurrencies is that you only need to place trust in the code & that the miners are selfish.
  - AgentME 6y ago
    Not to invalidate your point, but Tether is a particularly untrustworthy example. USDC is another centralized stablecoin that's more transparently managed than Tether, and then DAI is a decentralized stablecoin that keeps its value through a smart contract that manages collateral and minting in order to keep its value steady.
graeme 6y ago
Like Tether? They’re currently in the middle of a fraud case alleging they are not at all backed by USD and thus the peg is supported by fiat and liable to fall off. (I mean this in the dictionary sense of the word fiat that gives meaning to the phrase fiat currency. I don’t mean tether is supported by fiat currency)

GrumpyNl 6y ago

Marketing and marketing, jump the bitcoin bandwagon.

krisdol 6y ago

Full disclosure: I own about $11 worth of bitcoin if I round up a bit, so this might be biased. The most convincing "point" of bitcoin I've heard is to accomodate transfer of large sums of money across borders, quickly, with minimal transaction costs and oversight. Everyone here can afford the fee to transact 8 billion dollars worth of bitcoin. And settlement happens in seconds to a couple minutes. That's appealing to people trying to move millions or billions of dollars around.

systemvoltage 6y ago
That’s the thing. By the time the transfer takes place, BTC exchange rate is now 7% off. How convenient is the transfer mechanism when the underlying is a speculative instrument? Until BTC exchange rate gets stable or gets pegged do the ground, it’s gonna float around in the air of extreme volatility and manipulation - pretty risky adventure to transfer large sums of money.
- panarky 6y ago
  I prefer to own an asset with high volatility that gets more valuable over time than an asset with low volatility that gets less valuable over time.
  - adventured 6y ago
    You're talking about something entirely different from what the parent comment is. What you're talking about is a long-term investment.
  - edgyquant 6y ago
    We aren’t talking about assets and what you’ve just said is the reason we have controlled inflation. Currency isn’t supposed to incentivize hoarding it, quite the opposite in fact.
    - vntok 6y ago
      Not everyone agrees with that view. I for one would rather people spent their hard-earned money in a smart, slow and well-thought way than feel compelled by inflation to do so fast and lose.

fouldiplomacy 6y ago

"unstable, volatile, frantically manipulated currency" -- this is often the case with any news, not just "pump and dump" schemes. Take the Chinese CNY. The CCP have been undervaluing it for years for the purpose of attracting business. the USD is very much subject to social media and traditional news manipulation. When the US decides it wants a stimulus package or other types of debt, it drives down the dollar's value. Granted the US is good about making payments to creditors, i.e bonds, it is not immune to fluctuation. It is sad but the way of the dollar is slipping and the global demand currency. It is slowly being replaced by the CNY and other market demands. Lastly, the Treasury does not control the dollar. It the Foreign exchange markets. (https://www.fool.com/knowledge-center/who-determines-the-value-of-the-us-dollar.aspx https://www.fool.com/knowledge-center/who-determines-the-val...)

mdtusz 6y ago
USD price does fluctuate and inflate over time yes, but the difference is that this is essentially an invisible effect on day to day life for anyone that is not doing forex trading. The reason the US dollar is "stable" is partially due to the fact that it is backed by the US government. It is a requirement that businesses operating in the US accept payment in US dollars. Until somewhere mandates that bitcoin _must_ be accepted, it will never truly be a currency, the same way that gold is not a currency, and the same way that wheat, or potash, or shares in GME is not a currency. There's also a concept of "sticky" prices that most economists are quite familiar with - this assists in keeping the price of a coffee stable, whether or not technophiles accept it or not. Even if the price of the US dollar fell by 50% today, your coffee would still cost you around $2 or $3 tomorrow (assuming the coffee shop was even open).
- ggreer 6y ago
  > It is a requirement that businesses operating in the US accept payment in US dollars. People and businesses in the US have to pay the US government in US dollars, but there's no law requiring that a business accept any particular currency.[1][2] That said, if you do try to make your own currency, the feds will find some way to shut you down.[3] 1. https://www.federalreserve.gov/faqs/currency_12772.htm https://www.federalreserve.gov/faqs/currency_12772.htm 2. https://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx https://www.treasury.gov/resource-center/faqs/Currency/Pages... 3. https://www.forbes.com/sites/nathanlewis/2017/04/18/what-is-a-legal-tender-law-and-is-it-a-problem/ https://www.forbes.com/sites/nathanlewis/2017/04/18/what-is-...

centimeter 6y ago

It’s reasonable to expect the value of Bitcoin to stabilize as it becomes a more popular store of value. The US dollar provides stability and security over a very short timescale. It’s been inflating for decades (punishing dollar holders and waged/salaried workers) and based on the current political environment (insane dollar printing, “MMT” having political currency, etc.) there’s a substantial risk of serious dollar instability in the next few decades.

koonsolo 6y ago

With any fiat currency, you are indeed aware that it devalues at a steady pace.

tgraves83 6y ago

I agree that paying for things directly with bitcoin doesn't make sense. However, that doesn't mean bitcoin doesn't have a use case as a global settlement network and volatility isn't what's important, it's liquidity, which bitcoin has far more of then any other cryptocurrency. For an example of this take a look at something like Strike Global using bitcoin's lightning network. https://jimmymow.medium.com/announcing-strike-global-2392b908f611 https://jimmymow.medium.com/announcing-strike-global-2392b90...

tw04 6y ago
>it's liquidity, which bitcoin has far more of then any other cryptocurrency. "Far more of than any other cryptocurrency" is kind of a moot point. Does "bitcoin" (the people converting it to cash) have enough reserves in any real currency to cover even 10% of its value? There's no federal government backing it, and as best I can tell nothing to prevent the proverbial "run on the bank". I still struggle to see how bitcoin has anymore intrinsic value than collecting pokemon cards. It's worth something right up until it isn't without a major government supporting it.
- tgraves83 6y ago
  It doesn't sound like you bothered reading the link I posted. Price volatility caused by a "run on the bank" doesn't really matter if you are sending payments between two people using different currencies. The link I posted describes an app that as an example allows a payment to be sent from someone in the US to someone in Europe and have it settled instantly. Bitcoin is only used on the end of each transaction and converted in and out of dollars and euro's instantaneously making it's price irrelevant. The intrinsic value argument is old and tired at this point so I'm not even going to bother with it. Yes, Bitcoin at this stage is extremely volatile and anyone buying it to hold as an investment should understand it can lose or gain a lot of value quickly. However, it does have multiple use cases at this point that clearly the market has determined have some type of value. We're still figuring that out. As a side note, if you do some digging you can find some pretty good on-chain analytics that can theoretically put a sort of floor on the price based on how coins have moved over time. There are now quite a few sites like glassnode.com, cryptoquant.com, coinmentrics.io etc that provide this data or if you are technical enough set up your own node and verify it for yourself.

vbezhenar 6y ago

Your view must be skewed by privilege of having stable currency. Currency of my country lost 250% of its value over last 7 years. It's not bitcoin-level volatile, but close to it. Thankfully I have an option to use USD to hoard money, but that option is not something that's given, in many countries you just can't exchange for fair price. I agree that for someone living in US or EU there's no much point using BTC.

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tenaciousDaniel 6y ago
It's sad that this aspect of the conversation so often gets replaced by everything else. This is (IMO) the most important point about digital currency - the promise of providing consumers in unstable economies the chance to convert to a more stable currency without government intrusion. We're still not there, but that should be the north star for crypto (again, in my opinion).
- sorbits 6y ago
  Normally the government leverages its power to keep its currency stable. If a country fails at that, the residents tend to switch to another country’s currency, for example USD is widely accepted in countries with unstable currencies, and this makes sense, since a lot of commodity prices are set in USD. What we have seen with crypto currencies are extreme volatility, not useful to base a country’s economy on, and because it is decentralized, no-one can really intervene to control this volatility, by e.g. changing the interest rate, and nothing is priced in crypto currencies, to sort of keep it tied to something. The only metric for what a coin should cost seems to be the electricity/leasing of computers required to mine one. But even this metric is not good, as it is proportional to the size of the network, which is not a constant, and is likely to grow, as the price goes up.
  - lazide 6y ago
    Devils advocate - it is possible the large swings are also because it does not have the counterbalancing effect of a large economy on it, and as it gets used more often that will change. Being able to buy something I want today, because the price went up from yesterday, or saving today when I would have spent, because the price has dropped today causes a regulating effect. Right now the usage of it is low, small changes in this equation have an outsized effect.

waprin 6y ago

I used to think cryptocurrency was a solution in search of a problem, but the Robinhood fiasco has made me think otherwise. I find their clearing house explanation woefully insufficient in details, and open to the possiblity of being technically the truth but misleading (for example, they gave mass margin to lots of new accounts so they technically lacked collateral, but if they stopped new signups then cleared cash non-margin accounts would have been able to freely trade). Some might call me a conspiracy theorist, but the fact remains there’s no good way to verify any of what they’re telling us is true, other than to trust people with billion dollar reasons to mislead, or rely on an SEC which has repeatedly failed to do its job and stand up to big institutions (see Moody’s subprime ratings, or Robinhood already getting fined by SEC but for trivial amounts). There’s certainly pump and dumps, fraud and manipulation in crypto, but some could argue a lot of stocks exist right now with terrible fundamentals but huge market caps that nobody labels a pump and dump because “serious” institutions say the valuations are “forward looking.” All this is to say, finance is a game with massive incentives to deceive and manipulate. We see that in the traditional finance space and in the crypto space . But long term, Id argue in many ways the decentralized nature of crypto lends itself to far more transparency than our traditional systems. Now, that doesn’t mean it makes sense to buy coffee with crypto, or that a specific coin is the solution, especially one with the type of technical challenges BTC has. But in a broader sense, I do think decentralized finance is starting to look more and more like the future, if the alternative is to continually put trust into institutions that repeatedly betray that trust.

deleted 6y ago
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anythingdude321 6y ago
so nice to see the hackernews crowd finally figuring it out! i totally agree with you. i feel that if you keep digging, you'll find yourself convinced over time that BTC's "technical challenges" are not the flaws that they originally appear, and that in the long run crypto does make sense as a currency itself, in addition to a financial infrastructure.
nexthash 6y ago
Call me back when crypto is being used for anything normal - buying groceries, homes, pay checks, etc rather than trading and speculation. As of now, if my job attempts to pay me in DogeCoin I will quit and file a complaint with the NLRB. The thing is, no matter how much you think the current financial system is crooked, there is always a way to settle disputes through courts and regulators. The worst financial hiccups happen in areas without regulation. There were no rules on selling subprime mortgages or shorting more stock than exists, but unlike in the cryptoverse if something blows up it can be patched with legislation and restitution to victims. If your crypto gets stolen or a coin gets pumped and dumped, there is no recourse. With no connection to the real world comes no trust and no mercy.

kolinko 6y ago

The value is in ease of use for some cases. Or, in other words, what’s the point of having a stable currency if you can’t use it in smart contracts?

deevolution 6y ago

How can you possibly back up the claim that the USD is stable? My grandparents were able to buy several acres of land and build a house for 80k in the 1970s. Doing the same today costs 500k+!!! It's completely outrageous. Ths USD is far from stable and anyone who thinks so is either insanely privileged or ignorant!

lxgr 6y ago
Predictable inflation is a form of stability.
- Erlich_Bachman 6y ago
  "I would choose a volatile 200% increase over a year than a stable predictable 10% decrease." Michael J. Saylor
  - lxgr 6y ago
    Is this for an investment or a currency? There's a reason there is both.
dkersten 6y ago
Because the cappuccino will continue to cost them $4 tomorrow, next week and next month. Sure, its value changes and a cappuccino may even cost a different amount sometime in the future, but its easy to know the value of the money you have because the exchange rate between dollars and items in the shop doesn't change so much. Contrast that with bitcoin, where the value often changes by many, many cappuccino's in a single day.
- Geee 6y ago
  You can choose to become poor slowly or to get rich slowly. The short-term volatility doesn't matter in the long run.
  - lmm 6y ago

clusterfish 6y ago

The point is money laundering. Why do you think cryptocurrencies are still legal? Politicians need it.

MichaelBurge 6y ago

Volatility is a non-issue with the release of CME futures. You can short Bitcoin or Ethereum futures to lock in your price with respect to USD at any time. The base futures contracts are 5 Bitcoin i.e. notional value of $200k, but that's merely an inconvenience and not a fundamental blocker to subdivide the futures contract or have someone do it for you. I think for years payment companies like Bitpay have had price guarantees for merchants(probably using futures in the backend), but you do have more counterparty risk dealing with unregulated exchanges.

lui8906 6y ago

> Crypto's volatility deters me from using it, simply put. There is stable coins which have held a consistent peg against the US dollar for a couple of years now. You get all the benefit of high APY yield (relative to a bank account) and none of the volatility of a Doge or a BTC.

lottin 6y ago
You can be certain that an investment opportunity is a scam when it promises above-market returns with no additional risk.
- deeeeplearning 6y ago
  Savings Account APY != Market Returns. Fyi

reedjosh 6y ago

>What's the point of an unstable, volatile, frantically manipulated currency that is susceptible to social media pump and dump schemes (Elon + Doge)? BTC is only volatile as not enough people use it. Further, if you stay on USD, every year a cappuccino will cost you more. Fractional reserve banking is practically a license to print USD. We're not funding the stimulus or really any of our government via tax anymore. Inflation is the real tax.

denkmoon 6y ago

Really the only time you want to actually spend crypto is for regulated items. Porn + sex related items, and drugs. Maybe firearms and illegal information (ie. stolen credit cards, account credentials, malware). This move by MC seems at odds with their recent spat with Pornhub, but I would not be the first to accuse financial organisations of hypocrisy.

hertzrat 6y ago

Investing in Bitcoin seems like investing in GameStop: so many people are obsessed and want in on it but almost nobody really understands what’s going on or why the value is growing. They just want the easy money. Regardless of whether Bitcoin is a good investment or not, this is not a healthy way for an investment market to work

KorematsuFred 6y ago

A lot of currencies in the world are not stable and some are worse than some shitcoin. Also, there are some ridiculous restrictions on what you can do with your own money. For example in India you simply can't leave the country with your money. What are you going to do ? Bitcoin is helpful.

jernejzen 6y ago

You mean stable currency that is supported by 24$ trillion of national debt?

chemmail 6y ago

Typical worldview of a frog in a well.

twaybtclong 6y ago

I had 2% of my net worth in currencies subject to social media pump and dump schemes. It ballooned to 100% and now I have airplanes and stocks. Is that worth 2% of your net worth? You should read about optionality. You don't have to be poor if you understand risk.

literallycancer 6y ago

scp twice a day to keep the plebs at bay

janeroe 6y ago

> What's the point of an unstable, volatile, frantically manipulated currency I don't know, but for some reason people keep using USD. Even though in the long run BTC keeps growing and USD will only lose its value.

UShouldBWorking 6y ago

You (and most of the world) continues to miss the point of Bitcoin, just read the title of the white paper. It is a digital CASH payments network. This threatens the bankers and government so they have largely coopted the project and twisted Bitcoin Core into some sick settlement layer for their "second layer" products. Real Bitcoin (now called Bitcoin Cash) continues to be stable with low fees and instant transactions.

herbst 6y ago

A coffee in switzerland costs you 5 usd today when it cost 4 usd a few years back. Stable really is relative even with major currencies. I dont hold USD because it relatively loses in value for months and years now.

austhrow743 6y ago

Doing social media pump and dump schemes is fun and sometimes profitable.