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Bitcoin has utility; it separates money from the State. If that's not useful, I don't know what is. When the State deliberately debases its own currency year o

Bitcoin has utility; it separates money from the State. If that's not useful, I don't know what is. When the State deliberately debases its own currency year on year, and suddenly there is a useful option for saving, which nobody can debase, then it has provided something quite profound. And this is also why it is unlike any other 'bubble'. Whenever the perceived value of an asset increases quickly, many people scramble to produce more of that asset in order to take advantage of the higher prices. This overproduction then leads to prices dropping, or the bubble popping. What makes bitcoin different, is no matter how much work they put in to create more bitcoin, they cannot release more than the amount that was pre-determined for that ~10 minute period. The supply of bitcoin is completely decoupled from its demand. There has never been a 'bubble' in history with this property.

takeda 5y ago
That was true initially, but because of its price it became impractical as a currency. People are now only buying it as an investment, investment in what? It inherently doesn't have any value or utility.
- sparkie 5y ago
  Speculation is a distraction from the greater goal. When there are volatile exchange markets, people will always try to take advantage of them to make money. The fact that people see bitcoin as an investment is really a testament to just how awful fiat money is. Is bitcoin going up, or is fiat going down? It's probably both, but the reason people expect bitcoin to continue going up is precisely because the fiat money is being expanded and their purchasing power is being robbed via the inflation caused by that expansion. The expectation to continue going up isn't just guesswork or gambling either. If you study the history of money, then you learn that almost any time two monies are competing, the harder money displaces the easy money. All value is subjective, and always has been. If it the case that historically, people subjectively prefer to save the harder money (Gresham's Law), then what reason do you have to think this time is any different?
  - Kbelicius 5y ago
    > The fact that people see bitcoin as an investment is really a testament to just how awful fiat money is. I'd interpret that differently. The fact that people see bitcoin as an investment is really a testament to just how awful it is as money and how awful fiat money is as an investment. Basically what I'm saying is that majority of people view crypto as an investment not because fiat money is awful but because in its short lifespan crypto has had crazy returns. People see bitcoin as an investment because that is what it is to them and they invest in it because they hope they'll become crypto millionaires with a small investment. > The expectation to continue going up isn't just guesswork or gambling either. If you study the history of money, then you learn that almost any time two monies are competing, the harder money displaces the easy money. There is something wrong here. Gresham's law is about good and bad money not hard and easy. People prefer to save in good money and use bad money. Meaning that bad money displaces good money not the other way around. This applies when both currencies are considered legal tender. It is the other way round when there is no legal tender. Considering that USD is legal tender and BTC is not there is little point in invoking Gresham's law. > All value is subjective, and always has been. If it the case that historically, people subjectively prefer to save the harder money (Gresham's Law), then what reason do you have to think this time is any different? I'd argue, in this instance, that it is not about bad/good money here but about bitcoin being unusable as a currency so it pivoted in to being a "store of value".
qeternity 5y ago
> This overproduction then leads to prices dropping, or the bubble popping. This is absolutely not what causes most bubbles to pop. Pick any major bubble, it did not pop because suddenly we produced more of some thing.
danaris 5y ago
> Bitcoin has utility; it separates money from the State. This is, and always has been, wishful thinking. To the extent that it could be true, it is near-guaranteed that, given enough time, the State will ban the use of Bitcoin and other cryptocurrencies—whether "to maintain their monopoly" or "to protect people from scams", depending on your point of view. But there was never even a realistic possibility of Bitcoin becoming currency in a real sense. Its two biggest downfalls (that I can recall off the top of my head) are: - It cannot act as a reliable store of value. Because it is used extensively by speculators, its value is extremely volatile. Because its legal status is still unclear or in flux in many jurisdictions (including major ones), its value could fall to zero or near-zero with very little warning. - It has high transaction costs. This makes it prohibitive to use for everyday transactions without some kind of central authority to batch the transactions—and then you've just invented a new State, but with extra steps. There are other problems with it, but these two are more than enough to make it utterly unsuitable as currency. It's been great at making money for those who got in early, though. What do we call those kinds of schemes again...? Edit to add: All of this also presupposes that "separating money from the State" is actually a good thing. Most of us are not hardcore libertarians or anarchocapitalists, so we don't actually believe that it is.

takeda 5y ago

That was true initially, but because of its price it became impractical as a currency. People are now only buying it as an investment, investment in what? It inherently doesn't have any value or utility.

sparkie 5y ago
Speculation is a distraction from the greater goal. When there are volatile exchange markets, people will always try to take advantage of them to make money. The fact that people see bitcoin as an investment is really a testament to just how awful fiat money is. Is bitcoin going up, or is fiat going down? It's probably both, but the reason people expect bitcoin to continue going up is precisely because the fiat money is being expanded and their purchasing power is being robbed via the inflation caused by that expansion. The expectation to continue going up isn't just guesswork or gambling either. If you study the history of money, then you learn that almost any time two monies are competing, the harder money displaces the easy money. All value is subjective, and always has been. If it the case that historically, people subjectively prefer to save the harder money (Gresham's Law), then what reason do you have to think this time is any different?
- Kbelicius 5y ago
  > The fact that people see bitcoin as an investment is really a testament to just how awful fiat money is. I'd interpret that differently. The fact that people see bitcoin as an investment is really a testament to just how awful it is as money and how awful fiat money is as an investment. Basically what I'm saying is that majority of people view crypto as an investment not because fiat money is awful but because in its short lifespan crypto has had crazy returns. People see bitcoin as an investment because that is what it is to them and they invest in it because they hope they'll become crypto millionaires with a small investment. > The expectation to continue going up isn't just guesswork or gambling either. If you study the history of money, then you learn that almost any time two monies are competing, the harder money displaces the easy money. There is something wrong here. Gresham's law is about good and bad money not hard and easy. People prefer to save in good money and use bad money. Meaning that bad money displaces good money not the other way around. This applies when both currencies are considered legal tender. It is the other way round when there is no legal tender. Considering that USD is legal tender and BTC is not there is little point in invoking Gresham's law. > All value is subjective, and always has been. If it the case that historically, people subjectively prefer to save the harder money (Gresham's Law), then what reason do you have to think this time is any different? I'd argue, in this instance, that it is not about bad/good money here but about bitcoin being unusable as a currency so it pivoted in to being a "store of value".

qeternity 5y ago

> This overproduction then leads to prices dropping, or the bubble popping. This is absolutely not what causes most bubbles to pop. Pick any major bubble, it did not pop because suddenly we produced more of some thing.

danaris 5y ago

> Bitcoin has utility; it separates money from the State. This is, and always has been, wishful thinking. To the extent that it could be true, it is near-guaranteed that, given enough time, the State will ban the use of Bitcoin and other cryptocurrencies—whether "to maintain their monopoly" or "to protect people from scams", depending on your point of view. But there was never even a realistic possibility of Bitcoin becoming currency in a real sense. Its two biggest downfalls (that I can recall off the top of my head) are: - It cannot act as a reliable store of value. Because it is used extensively by speculators, its value is extremely volatile. Because its legal status is still unclear or in flux in many jurisdictions (including major ones), its value could fall to zero or near-zero with very little warning. - It has high transaction costs. This makes it prohibitive to use for everyday transactions without some kind of central authority to batch the transactions—and then you've just invented a new State, but with extra steps. There are other problems with it, but these two are more than enough to make it utterly unsuitable as currency. It's been great at making money for those who got in early, though. What do we call those kinds of schemes again...? Edit to add: All of this also presupposes that "separating money from the State" is actually a good thing. Most of us are not hardcore libertarians or anarchocapitalists, so we don't actually believe that it is.