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I think stability is important too. Currencies do fluctuate but not very much, and volatility usually leads to bad consequences. That's the main problem with
by foobarian 5y ago
I think stability is important too. Currencies do fluctuate but not very much, and volatility usually leads to bad consequences. That's the main problem with Bitcoin - it is too unstable. Using it as a currency is much like using shares of some random company as currency. Imagine getting paid in, say, TSLA stock and using it to buy everyday needs!
- Geee 5y agoValue and stability have more to do with adoption phase, i.e. how many people accept it as good money and want to use it. Today, Bitcoin is mostly traded against USD or other currencies, and these traders make up most of the total trading volume. The volatility is the result of this very one-sided activity. If it was used as money, it would be traded against goods and services, real estate, stocks, etc. which would give it lots of uncorrelated trading volume and create stability. Inherently, Bitcoin is very predictable, because we know with certainty how many bitcoins have been issued and how many will be issued in the future. Fiat currencies have an opposite problem. Central banks and governments influence the issuance and value of the currency too much, and this makes the currency inherently unpredictable. It has an effect of destroying confidence in free markets, because everything becomes a bet on monetary policy rather than markets itself. Same problem with TSLA; it is inherently unpredictable (both in issuance and dependency on their business success). In other words, some assets carry an inherent risk in them, and they're not good as money.