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> But you're missing the point about "automatic conversion": the USD has to come from somewhere. Converting from BTC isn't transmutation - the BTC is sold for U

by knocte 6y ago

> But you're missing the point about "automatic conversion": the USD has to come from somewhere. Converting from BTC isn't transmutation - the BTC is sold for USD. The transaction happens in USD and must come from available USD for BTC sellers. So what? So long as the USD exists, there will always be liquidity in the BTCUSD orderbooks. And the conversion can be done by the state itself when getting paid (see my link about Miami).

notahacker 6y ago
> So what? So long as the USD exists, there will always be liquidity in the BTCUSD orderbooks. There is only liquidity in the order book if more people wish to obtain BTC in return for USD at the price you wish to sell at than wish to sell at that price. There is no particular property of Bitcoin that ensures this will be the case (the "it will hold its value because people will want it as a store of value" reasoning is entirely circular). On the other hand, the USD has the property of being legally guaranteed to be able to settle 1USD worth of debt (and the design of the financial system ensures there will always be people who need dollars to discharge their debts). So it's "backed" by mountains of debt. 46k USD has the unique property of being sure to be able to pay a $46k bill on a future date. $46k worth of anything else relies on your ability to swap it for at least $46k actual dollars closer to that date. Some of those non-dollar things have other useful properties like being able to live in them that compensate for the downside risk of losing money in a future exchange, others directly pay you coupons and/or have collateral associated with them. A BTC has no consumption benefit, legal claims on anything or coupon payment to compensate you for the risk you might not be able to exchange it for $46k when that bill is due - it's as pure an example of "fiat" creation of assets not backed by anything at all as you're ever likely to see. The only thing it's really got going for it is being more durable than, say, $46k of fruit, but that applies to a lot of other physical and financial products.
- beagle3 6y ago
  All you say is true, but it is also true if you replace BTC with EUR. It’s just a statement about the non-canonical currency, nothing to do with Bitcoin.
  - notahacker 6y ago
    No, EUR is needed by hundreds of millions of Europeans as the only legal way to satisfy their Euro denominated debts, taxes or other payment obligations. So one can safely assume that demand for EUR is linked on actual need to hold it Some people have devised contracts whereby they owe others Bitcoins, but those obligations are comparatively tiny in comparison with the quantity of Bitcoins out there, Bitcoins are not legal tender anywhere, and the issuing of new Bitcoins is not backed by BTC-denominated debt, or anything else.
    - beagle3 6y ago
      Ok then, Zimbabwean dollars then. The distinction is not because of what Bitcoin is, it’s that you think demand may go to zero. Well, it has gone to zero for “bona fide” currencies like zim dollar recently and German currency 100 years ago.
      - notahacker 6y ago
        Sure, Zimbabwe and the Weimar Republic issued currency that was mostly not backed by repayment obligations (they printed precisely because they needed funds far in excess of what they could tax) much like Bitcoin is almost entirely not backed by repayment obligations. It is possible for a sufficiently incompetently managed central bank to create an asset almost as unlikely to be needed to make payments as your average cryptocurrency.

by knocte 6y ago

notahacker 6y ago

> So what? So long as the USD exists, there will always be liquidity in the BTCUSD orderbooks. There is only liquidity in the order book if more people wish to obtain BTC in return for USD at the price you wish to sell at than wish to sell at that price. There is no particular property of Bitcoin that ensures this will be the case (the "it will hold its value because people will want it as a store of value" reasoning is entirely circular). On the other hand, the USD has the property of being legally guaranteed to be able to settle 1USD worth of debt (and the design of the financial system ensures there will always be people who need dollars to discharge their debts). So it's "backed" by mountains of debt. 46k USD has the unique property of being sure to be able to pay a $46k bill on a future date. $46k worth of anything else relies on your ability to swap it for at least $46k actual dollars closer to that date. Some of those non-dollar things have other useful properties like being able to live in them that compensate for the downside risk of losing money in a future exchange, others directly pay you coupons and/or have collateral associated with them. A BTC has no consumption benefit, legal claims on anything or coupon payment to compensate you for the risk you might not be able to exchange it for $46k when that bill is due - it's as pure an example of "fiat" creation of assets not backed by anything at all as you're ever likely to see. The only thing it's really got going for it is being more durable than, say, $46k of fruit, but that applies to a lot of other physical and financial products.

beagle3 6y ago
All you say is true, but it is also true if you replace BTC with EUR. It’s just a statement about the non-canonical currency, nothing to do with Bitcoin.
- notahacker 6y ago
  No, EUR is needed by hundreds of millions of Europeans as the only legal way to satisfy their Euro denominated debts, taxes or other payment obligations. So one can safely assume that demand for EUR is linked on actual need to hold it Some people have devised contracts whereby they owe others Bitcoins, but those obligations are comparatively tiny in comparison with the quantity of Bitcoins out there, Bitcoins are not legal tender anywhere, and the issuing of new Bitcoins is not backed by BTC-denominated debt, or anything else.
  - beagle3 6y ago
    Ok then, Zimbabwean dollars then. The distinction is not because of what Bitcoin is, it’s that you think demand may go to zero. Well, it has gone to zero for “bona fide” currencies like zim dollar recently and German currency 100 years ago.
    - notahacker 6y ago
      Sure, Zimbabwe and the Weimar Republic issued currency that was mostly not backed by repayment obligations (they printed precisely because they needed funds far in excess of what they could tax) much like Bitcoin is almost entirely not backed by repayment obligations. It is possible for a sufficiently incompetently managed central bank to create an asset almost as unlikely to be needed to make payments as your average cryptocurrency.