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"On the other hand, sometimes the value goes down just as fast as during a bout of hyperinflation. " except for completely different reasons. hyperinflation co

"On the other hand, sometimes the value goes down just as fast as during a bout of hyperinflation. " except for completely different reasons. hyperinflation comes from out of control money printing by government. bitcoin value goes up and down due to regular ole supply and demand. i feel dumber having read this.

danaris 5y ago
In other words: Hyperinflation can be avoided by sound monetary policy. Bitcoin's value dropping off a cliff happens because of "market forces"—which are not something we can say "no, let's not do that" to. Bitcoin does not make a reasonable currency by any stretch of the imagination. It's a speculative vehicle.
- reginold 5y ago
  I agree with the context of your explanation. Government regulation of money supply is an important issue. But the author didn't say all that. In that paragraph they say Bitcoin is not a useful currency because the value fluctuates. They did not suggest that what makes Bitcoin fluctuate is the lack of government controls/regulation of supply. They simply say fluctuation is bad for a currency. They then make an analogy to hyperinflation, which I'm suggesting is sloppy given the argument they are making because hyperinflation happens because of money printing by the central bank, which is not what causes fluctuation in bitcoin's price. For example they could have said "Bitcoin fluctuates because of massive speculation and trading. Fluctuation is bad for a currency". Or "Bitcoin fluctuates because there's no one who controls the supply" Either works for me, not that I agree but at least it's clear. But instead they make no explanation of what causes the fluctuations, and instead use this hyperinflation metaphor which is horribly inaccurate. That paragraph of the article has a related issue which is they say "The supply of Bitcoin is capped by design, which is meant to prevent inflation". Shouldn't this read "which prevents inflation"? I understand there are all sorts of forces governing the value of bitcoin (speculation, manipulation, supply, demand, miners) but I don't believe "inflation" is one of them. There are coins still being issued but the supply is capped at 21M. It's possible I'm misunderstanding here and this article actually is well written and I'm an idiot. The article just seems like a collection of gotchas, none of which are well explained. I'm generally pro-bitcoin but appreciate sharp thinking wherever it comes from as no one really knows how this will all play out but we can make good arguments (or bad ones).
  - randomhodler84 5y ago
    This article is well not well written. The author thinks that the US cracked the math, ala “enigma cracking” rather than just asking for the balance left in a central exchange. This article is sorta like a 2017 era ignorance piece.
  - imtringued 5y ago
    >Shouldn't this read "which prevents inflation"? As I mentioned above, hyperinflation happens when everyone abandons the currency and uses something else. Bitcoin is not immune to that just because it has a fixed supply. There are lots of fixed supply cryptocurrencies that went to 0.
    - reginold 5y ago
      Appreciate your explanation. Has hyperinflation ever struck a fixed supply currency? Curious for examples. My understanding of hyperinflation is pretty limited so I'm curious to hear more.
imtringued 5y ago
>hyperinflation comes from out of control money printing by government. Hyperinflation comes from the fact that governments are unable to service external debt. That's enough to explain the Weimar Republic, Zimbabwe and Venezuela. Here is the three step plan to hyperinflation. Destroy the local economy. Incur external debt to cover the shortfall. Everyone exchanges their worthless currency for the currency that was used to import products. Germany was destroyed in the war. Venezuela was hit with huge sanctions on their primary industry. Zimbabwe destroyed its agricultural economy by taking land away from farmers.
- reginold 5y ago
  Appreciate the examples here. And how do you see this applying to cryptocurrencies with fixed supply? Can a fixed supply cryptocurrency incur external debt somehow?
  - danaris 5y ago
    The problem with cryptocurrencies is not hyperinflation in the same sense. It is that they are being treated as speculative assets, not currencies, and are thus subject to the same wild swings in value. This makes them terrible for use as an actual currency, which must be reasonably stable in order for people to use it in safety and comfort.
    - reginold 5y ago
      Speculative assets, wild swings in value, terrible as a currency -- I hear you on all of these. My point is simply that the author of the article used "hyperinflation" as one of the weaknesses of Bitcoin. Though Bitcoin has many weaknesses and ills, hyperinflation is not one of them.
      - danaris 5y ago
        But...he didn't. He said its value sometimes "goes down as fast as during a bout of hyperinflation". He was pointing out that when you try to use it as a currency, it shares some of the worst possible features of currencies, without their balancing benefits.

danaris 5y ago

In other words: Hyperinflation can be avoided by sound monetary policy. Bitcoin's value dropping off a cliff happens because of "market forces"—which are not something we can say "no, let's not do that" to. Bitcoin does not make a reasonable currency by any stretch of the imagination. It's a speculative vehicle.

reginold 5y ago
I agree with the context of your explanation. Government regulation of money supply is an important issue. But the author didn't say all that. In that paragraph they say Bitcoin is not a useful currency because the value fluctuates. They did not suggest that what makes Bitcoin fluctuate is the lack of government controls/regulation of supply. They simply say fluctuation is bad for a currency. They then make an analogy to hyperinflation, which I'm suggesting is sloppy given the argument they are making because hyperinflation happens because of money printing by the central bank, which is not what causes fluctuation in bitcoin's price. For example they could have said "Bitcoin fluctuates because of massive speculation and trading. Fluctuation is bad for a currency". Or "Bitcoin fluctuates because there's no one who controls the supply" Either works for me, not that I agree but at least it's clear. But instead they make no explanation of what causes the fluctuations, and instead use this hyperinflation metaphor which is horribly inaccurate. That paragraph of the article has a related issue which is they say "The supply of Bitcoin is capped by design, which is meant to prevent inflation". Shouldn't this read "which prevents inflation"? I understand there are all sorts of forces governing the value of bitcoin (speculation, manipulation, supply, demand, miners) but I don't believe "inflation" is one of them. There are coins still being issued but the supply is capped at 21M. It's possible I'm misunderstanding here and this article actually is well written and I'm an idiot. The article just seems like a collection of gotchas, none of which are well explained. I'm generally pro-bitcoin but appreciate sharp thinking wherever it comes from as no one really knows how this will all play out but we can make good arguments (or bad ones).
- randomhodler84 5y ago
  This article is well not well written. The author thinks that the US cracked the math, ala “enigma cracking” rather than just asking for the balance left in a central exchange. This article is sorta like a 2017 era ignorance piece.
- imtringued 5y ago
  >Shouldn't this read "which prevents inflation"? As I mentioned above, hyperinflation happens when everyone abandons the currency and uses something else. Bitcoin is not immune to that just because it has a fixed supply. There are lots of fixed supply cryptocurrencies that went to 0.
  - reginold 5y ago
    Appreciate your explanation. Has hyperinflation ever struck a fixed supply currency? Curious for examples. My understanding of hyperinflation is pretty limited so I'm curious to hear more.

imtringued 5y ago

>hyperinflation comes from out of control money printing by government. Hyperinflation comes from the fact that governments are unable to service external debt. That's enough to explain the Weimar Republic, Zimbabwe and Venezuela. Here is the three step plan to hyperinflation. Destroy the local economy. Incur external debt to cover the shortfall. Everyone exchanges their worthless currency for the currency that was used to import products. Germany was destroyed in the war. Venezuela was hit with huge sanctions on their primary industry. Zimbabwe destroyed its agricultural economy by taking land away from farmers.

reginold 5y ago
Appreciate the examples here. And how do you see this applying to cryptocurrencies with fixed supply? Can a fixed supply cryptocurrency incur external debt somehow?
- danaris 5y ago
  The problem with cryptocurrencies is not hyperinflation in the same sense. It is that they are being treated as speculative assets, not currencies, and are thus subject to the same wild swings in value. This makes them terrible for use as an actual currency, which must be reasonably stable in order for people to use it in safety and comfort.
  - reginold 5y ago
    Speculative assets, wild swings in value, terrible as a currency -- I hear you on all of these. My point is simply that the author of the article used "hyperinflation" as one of the weaknesses of Bitcoin. Though Bitcoin has many weaknesses and ills, hyperinflation is not one of them.
    - danaris 5y ago
      But...he didn't. He said its value sometimes "goes down as fast as during a bout of hyperinflation". He was pointing out that when you try to use it as a currency, it shares some of the worst possible features of currencies, without their balancing benefits.