8 ms·

> it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy (dealt with debt via inflation aka

> it’s terrible as a wide spread value store because it removes an important tool that governments have to handle the economy (dealt with debt via inflation aka printing money How does a static rather than unconstrained supply make something a LESS good store of value?

DavidSJ 6y ago
It might be a good store of value (aside from its extreme volatility), but the GP comment would be correct if you substitute "medium of exchange" for "store of value".
- trident5000 6y ago
  Gold is short term volatile as well. Long term average is all that matters to be an effective value store. Its like a more volatile gold right now through price discovery.
  - ori_b 6y ago
    Gold is also a poor place to put your money. The long term average is both volatile and underperforms most indexes. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
    - trident5000 6y ago
      Gold is not in price discovery because its been around for so long and already had its ETF moment (which is why its stagnated since that massive run). But gold has always performed cyclically. Long term (very long term) its done quite well. Not my cup of tea but it had its place. Going forward I expect btc will disrupt it and flip its value (JPM making the same call).
      - ori_b 6y ago
        Over the last 100 years, you'd have done significantly better by putting your money into an index fund -- and had less volatility. As far as I can tell, gold is just a lousy place to keep your money. What kind of long term are you talking about?
        TuringNYC 6y ago
        I agree with you in theory. However, over the course of 100yrs you also need to worry about entire countries disappearing. If your index fund is denominated in the wrong currency, held by the wrong custodian, or has too many companies based in falling countries, you might be in trouble. Meanwhile, Gold has survived a thousand generations. In a hundred years, there can be wars, reparations, and lots of damage to equity. I think some distinction should be made on store of value (win for gold) vs asset appreciation (win for stocks), especially once you start talking about 100years.
        deleted 6y ago
        [deleted]
        lupire 6y ago
        When your country collapses, you tend to find practical matters that make gold a poor store of value, unless you dissolve your gold bars in acid when the war starts.
        Consultant32452 6y ago
        My impression is gold is largely seen as a low risk inflation hedge rather than a growth investment. A better comparison would be a savings account or maybe municipal bonds.
        the_giraffe 6y ago
        Did index funds exist 100 years ago? I'm pretty sure passive investing is a more recent phenomenon.
        deleted 6y ago
    - benibela 6y ago
      Perhaps that means gold is now cheaper than the index and thus will perform better than the index? Germany has weird taxes. There there is a 25% tax on stock market returns. But no tax on gold sales. Nor on Bitcoin sales. Although silver is taxed.
  - llamataboot 6y ago
    Gold has stored value for a little bit longer than bitcoin, and the volatility isn't really even within orders of the same magnitude.
  - imtringued 6y ago
    Bitcoin is mostly littered with bubbles and a hidden deflationary trend. Right now the 300% gains are just part of a bubble that is going to pop but Bitcoin will recover to a fraction of that, however that fraction is still higher than it started off. The long term gains per year are much smaller than the bubble gains. I wish people would stop "bubbling" Bitcoin and actually look at the long term trend like people do for stocks. At least I hope people research their stocks and ignore the last 2 years of gains when analyzing a stock or index fund.
PragmaticPulp 6y ago
Bitcoin's constrained supply is almost a red herring at this point. The usual fallacy is when proponents claim that Bitcoin is the only asset able to escape inflation due to fiscal policy interventions. This couldn't be more false. The very definition of inflation is an increases in prices, or a decrease in buying power. However, investors have been buying assets and investments to avoid inflation long before Bitcoin was even invented. Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses. Bitcoin has value not because someone coded a 21 million coin limit in the code somewhere. Bitcoin has value because people want Bitcoin. Why do people want Bitcoin? Because the price goes up up. Why does the price go up? Because people want Bitcoin. As soon as something breaks that cycle, it doesn't matter what the maximum number of coins is. Without demand from the belief of future increases due to increasing demand, the price will go down. The purchasing power decreases. Everyone likes to demonize fiscal intervention, but the reality is that counter-cyclical fiscal intervention tends to benefit the average person. Running inflation too hot is bad, but swinging to a full deflationary currency (Bitcoin) would also be bad for the economy.
- colecut 6y ago
  "Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses." This is true, but the bottom at which people value bitcoin continues to rise significantly over time. Yes there are crazy bull cycles and bear markets that make the price highly volatile, but even people who bought at the absolute worst time 3 years ago, at $20k, before the price tanked by 80%, are currently nearly at 150% profit. The price continues to be volatile yet less and less risky and overall trending upwards.
  - noch 6y ago
    > The price continues to be volatile yet less and less risky and overall trending upwards. Please stop telling nocoiners this arcane and forbidden knowledge! Instead, encourage them in their belief that Bitcoin is a scam, a collective delusion, a market mania, a bubble, based on nothing, wastes energy, will go to zero, and so forth. When, in a decade, 1btc == usd1M, we'll all be grateful that such people stayed out of the market long enough to allow us to buy more bitcoin relatively cheaply. What they can't see is that Bitcoin is now more likely inevitable than not.
xapata 6y ago
> How does a static rather than unconstrained supply make something a LESS good store of value? Because a healthy capitalist economy needs an incentive to invest. A steady, low, positive inflation rate is essential to encouraging those with capital to rent that capital out to those who need it for productive uses.
- imtringued 6y ago
  You're absolutely correct. USD is a poor store of value, by design, because productive activity is better than unproductive activity. However, this doesn't say anything about Bitcoin, other than that it fails to be relevant as a currency. The reason why Bitcoin is a poor store of value is that owning Bitcoin doesn't guarantee that there will be an economy in the future that actually provides value equivalent to the value of your Bitcoin. If you invest into stocks or real estate you are making sure that there is a company or house out there that contributes to the economy.
  - xapata 6y ago
    The question was about "static rather than unconstrained supply" not the relation to real wealth.
tylerhou 6y ago
Econ 101: the value of ordinary goods are determined both by supply and demand. Bitcoin-fanatic-USD-bears claim that Bitcoin is a good store of value because it has constrained supply. But they miss the demand side of the equation. Similarly, they claim that the USD is a bad source of value because it has "unlimited" supply. That also misses the demand side. The demand for USD is robust because people need USD to pay taxes and to purchase most goods and services offered by US-based organizations. The demand for Bitcoin is based on... how many people Bitcoin-fanatics can get to buy and hodl Bitcoin. (I don't count organizations that accept Bitcoin as payment because almost all of them exchange received Bitcoin into the local currency, negating the demand effects of the original Bitcoin purchase. In the US, that's usually USD.)
- PragmaticPulp 6y ago
  Exactly. Bitcoin proponents tend to tell only half of the story, and pick and choose economic theory that fits the "buy more bitcoin" narrative. In economic terms, Bitcoin is inflating as an asset. Specifically, it's demand-pull inflation. Bitcoin isn't even uniquely positioned to protect against inflation, other than the mistaken public belief on that topic. Inflation is an increase in the price of assets, so investors can (and do) escape inflation by investing their money. Ironically, Bitcoin's limited supply disincentivizes holders from investing their money.
  - tylerhou 6y ago
    > Bitcoin is inflating as an asset. I don't think this is precise. Inflation of an asset means that the asset itself drops in value, relative to the value of other goods. For example: when prices rise, the USD itself would be inflating because would then take more USD to buy goods. Bitcoin is rising in price compared to the USD. So it's not "inflating." If we treat Bitcoin as a currency, it's deflating because right now it takes fewer Bitcoin to buy goods than one year ago. This is also why "asset inflation" is not precise. The asset itself is not inflating, it is actually deflating wrt. to other goods.
    - DenisM 6y ago

DavidSJ 6y ago

It might be a good store of value (aside from its extreme volatility), but the GP comment would be correct if you substitute "medium of exchange" for "store of value".

trident5000 6y ago
Gold is short term volatile as well. Long term average is all that matters to be an effective value store. Its like a more volatile gold right now through price discovery.
- ori_b 6y ago
  Gold is also a poor place to put your money. The long term average is both volatile and underperforms most indexes. https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
  - trident5000 6y ago
    Gold is not in price discovery because its been around for so long and already had its ETF moment (which is why its stagnated since that massive run). But gold has always performed cyclically. Long term (very long term) its done quite well. Not my cup of tea but it had its place. Going forward I expect btc will disrupt it and flip its value (JPM making the same call).
    - ori_b 6y ago
      Over the last 100 years, you'd have done significantly better by putting your money into an index fund -- and had less volatility. As far as I can tell, gold is just a lousy place to keep your money. What kind of long term are you talking about?
      - TuringNYC 6y ago
        I agree with you in theory. However, over the course of 100yrs you also need to worry about entire countries disappearing. If your index fund is denominated in the wrong currency, held by the wrong custodian, or has too many companies based in falling countries, you might be in trouble. Meanwhile, Gold has survived a thousand generations. In a hundred years, there can be wars, reparations, and lots of damage to equity. I think some distinction should be made on store of value (win for gold) vs asset appreciation (win for stocks), especially once you start talking about 100years.
        deleted 6y ago
        [deleted]
        lupire 6y ago
        When your country collapses, you tend to find practical matters that make gold a poor store of value, unless you dissolve your gold bars in acid when the war starts.
      - Consultant32452 6y ago
        My impression is gold is largely seen as a low risk inflation hedge rather than a growth investment. A better comparison would be a savings account or maybe municipal bonds.
      - the_giraffe 6y ago
        Did index funds exist 100 years ago? I'm pretty sure passive investing is a more recent phenomenon.
        deleted 6y ago
  - benibela 6y ago
    Perhaps that means gold is now cheaper than the index and thus will perform better than the index? Germany has weird taxes. There there is a 25% tax on stock market returns. But no tax on gold sales. Nor on Bitcoin sales. Although silver is taxed.
- llamataboot 6y ago
  Gold has stored value for a little bit longer than bitcoin, and the volatility isn't really even within orders of the same magnitude.
- imtringued 6y ago
  Bitcoin is mostly littered with bubbles and a hidden deflationary trend. Right now the 300% gains are just part of a bubble that is going to pop but Bitcoin will recover to a fraction of that, however that fraction is still higher than it started off. The long term gains per year are much smaller than the bubble gains. I wish people would stop "bubbling" Bitcoin and actually look at the long term trend like people do for stocks. At least I hope people research their stocks and ignore the last 2 years of gains when analyzing a stock or index fund.

PragmaticPulp 6y ago

Bitcoin's constrained supply is almost a red herring at this point. The usual fallacy is when proponents claim that Bitcoin is the only asset able to escape inflation due to fiscal policy interventions. This couldn't be more false. The very definition of inflation is an increases in prices, or a decrease in buying power. However, investors have been buying assets and investments to avoid inflation long before Bitcoin was even invented. Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses. Bitcoin has value not because someone coded a 21 million coin limit in the code somewhere. Bitcoin has value because people want Bitcoin. Why do people want Bitcoin? Because the price goes up up. Why does the price go up? Because people want Bitcoin. As soon as something breaks that cycle, it doesn't matter what the maximum number of coins is. Without demand from the belief of future increases due to increasing demand, the price will go down. The purchasing power decreases. Everyone likes to demonize fiscal intervention, but the reality is that counter-cyclical fiscal intervention tends to benefit the average person. Running inflation too hot is bad, but swinging to a full deflationary currency (Bitcoin) would also be bad for the economy.

colecut 6y ago
"Bitcoin isn't a particularly good store of value because the price is driven purely by demand, which is currently in a state of market mania. It's not even the first market mania around Bitcoin. Past bubbles were also met with a "this time it's different" attitude before the inevitable sharp losses." This is true, but the bottom at which people value bitcoin continues to rise significantly over time. Yes there are crazy bull cycles and bear markets that make the price highly volatile, but even people who bought at the absolute worst time 3 years ago, at $20k, before the price tanked by 80%, are currently nearly at 150% profit. The price continues to be volatile yet less and less risky and overall trending upwards.
- noch 6y ago
  > The price continues to be volatile yet less and less risky and overall trending upwards. Please stop telling nocoiners this arcane and forbidden knowledge! Instead, encourage them in their belief that Bitcoin is a scam, a collective delusion, a market mania, a bubble, based on nothing, wastes energy, will go to zero, and so forth. When, in a decade, 1btc == usd1M, we'll all be grateful that such people stayed out of the market long enough to allow us to buy more bitcoin relatively cheaply. What they can't see is that Bitcoin is now more likely inevitable than not.

xapata 6y ago

> How does a static rather than unconstrained supply make something a LESS good store of value? Because a healthy capitalist economy needs an incentive to invest. A steady, low, positive inflation rate is essential to encouraging those with capital to rent that capital out to those who need it for productive uses.

imtringued 6y ago
You're absolutely correct. USD is a poor store of value, by design, because productive activity is better than unproductive activity. However, this doesn't say anything about Bitcoin, other than that it fails to be relevant as a currency. The reason why Bitcoin is a poor store of value is that owning Bitcoin doesn't guarantee that there will be an economy in the future that actually provides value equivalent to the value of your Bitcoin. If you invest into stocks or real estate you are making sure that there is a company or house out there that contributes to the economy.
- xapata 6y ago
  The question was about "static rather than unconstrained supply" not the relation to real wealth.

tylerhou 6y ago

Econ 101: the value of ordinary goods are determined both by supply and demand. Bitcoin-fanatic-USD-bears claim that Bitcoin is a good store of value because it has constrained supply. But they miss the demand side of the equation. Similarly, they claim that the USD is a bad source of value because it has "unlimited" supply. That also misses the demand side. The demand for USD is robust because people need USD to pay taxes and to purchase most goods and services offered by US-based organizations. The demand for Bitcoin is based on... how many people Bitcoin-fanatics can get to buy and hodl Bitcoin. (I don't count organizations that accept Bitcoin as payment because almost all of them exchange received Bitcoin into the local currency, negating the demand effects of the original Bitcoin purchase. In the US, that's usually USD.)

PragmaticPulp 6y ago
Exactly. Bitcoin proponents tend to tell only half of the story, and pick and choose economic theory that fits the "buy more bitcoin" narrative. In economic terms, Bitcoin is inflating as an asset. Specifically, it's demand-pull inflation. Bitcoin isn't even uniquely positioned to protect against inflation, other than the mistaken public belief on that topic. Inflation is an increase in the price of assets, so investors can (and do) escape inflation by investing their money. Ironically, Bitcoin's limited supply disincentivizes holders from investing their money.
- tylerhou 6y ago
  > Bitcoin is inflating as an asset. I don't think this is precise. Inflation of an asset means that the asset itself drops in value, relative to the value of other goods. For example: when prices rise, the USD itself would be inflating because would then take more USD to buy goods. Bitcoin is rising in price compared to the USD. So it's not "inflating." If we treat Bitcoin as a currency, it's deflating because right now it takes fewer Bitcoin to buy goods than one year ago. This is also why "asset inflation" is not precise. The asset itself is not inflating, it is actually deflating wrt. to other goods.
  - DenisM 6y ago