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> Managing your own monetary policy and being able to spend without limits is important tool for governments. Sure, but we're talking about switching to BTC, w

by hiq 5y ago

> Managing your own monetary policy and being able to spend without limits is important tool for governments. Sure, but we're talking about switching to BTC, which doesn't allow this either. > Bitcoin is the only currency which has very high guarantees of its expected monetary inflation. As somebody else pointed out in another thread, bitcoin is either a currency or an asset depending on who you talk to. You mention it is a currency, but it's hard to find it credible in this role given its volatility. Given that its price is a function of supply and demand, but that we can't predict what the demand will be, which strong guarantees are you thinking about?

Geee 5y ago
Monetary inflation is the amount of new money that is created, i.e. how much the supply expands. In Bitcoin, inflation schedule is predefined and there's an absolute limit, and these rules can't be changed. This means that if Bitcoin's demand increases, then the price increases. In other currencies, supply will be expanded if demand increases to stabilize the price. This applies to everything else too, like commodities or real estate. Increased price will increase production, until the price corrects to cost of production. Demand can't really be predicted, but historically we know that if supply expansion is predictably low (like in gold), most people would prefer to save their wealth in that money. Volatility is expected to decrease in time, making it more practical in short-term transactions.
- hiq 5y ago
  I thought your were talking about price inflation, but you actually wrote "monetary inflation", my bad. But what's the point of taming monetary inflation if that does nothing for price inflation? I thought that price inflation was the practical consequence we have to deal with, isn't that the case? > Demand can't really be predicted, but historically we know that if supply expansion is predictably low (like in gold), most people would prefer to save their wealth in that money. The supply of bitcoins is low, but the supply of bitcoin-like tokens seems limitless. The question is: which pool do we consider? Are BTC and ETH in the same pool? What about other tokens? The same reasoning applies to gold and other metals, but at least you won't come up with a new one on a whim like you can with cryptocurrencies.
  - Geee 5y ago
    Monetary inflation is a major component of price inflation. See this recent article by Lyn Alden, which explains it pretty well: https://www.lynalden.com/price-signals/ https://www.lynalden.com/price-signals/ No, they are different pools of supply. Each currency has their own network effect, and building the network effect is not limitless. On the contrary, money tends to concentrate on a single or a few winners. People want to use the currency everyone else is using.
    - hiq 5y ago
      Your link mention historical correlations that contain the impact of central bank policies, it's not clear to me how well this generalizes to a given and strict supply policy such as the one bitcoin has. > No, they are different pools of supply. I guess we'll see in the long term what happens, I'll just say that the correlations between BTC/USD and ETH/USD make it less than obvious.

by hiq 5y ago

Geee 5y ago

Monetary inflation is the amount of new money that is created, i.e. how much the supply expands. In Bitcoin, inflation schedule is predefined and there's an absolute limit, and these rules can't be changed. This means that if Bitcoin's demand increases, then the price increases. In other currencies, supply will be expanded if demand increases to stabilize the price. This applies to everything else too, like commodities or real estate. Increased price will increase production, until the price corrects to cost of production. Demand can't really be predicted, but historically we know that if supply expansion is predictably low (like in gold), most people would prefer to save their wealth in that money. Volatility is expected to decrease in time, making it more practical in short-term transactions.

hiq 5y ago
I thought your were talking about price inflation, but you actually wrote "monetary inflation", my bad. But what's the point of taming monetary inflation if that does nothing for price inflation? I thought that price inflation was the practical consequence we have to deal with, isn't that the case? > Demand can't really be predicted, but historically we know that if supply expansion is predictably low (like in gold), most people would prefer to save their wealth in that money. The supply of bitcoins is low, but the supply of bitcoin-like tokens seems limitless. The question is: which pool do we consider? Are BTC and ETH in the same pool? What about other tokens? The same reasoning applies to gold and other metals, but at least you won't come up with a new one on a whim like you can with cryptocurrencies.
- Geee 5y ago
  Monetary inflation is a major component of price inflation. See this recent article by Lyn Alden, which explains it pretty well: https://www.lynalden.com/price-signals/ https://www.lynalden.com/price-signals/ No, they are different pools of supply. Each currency has their own network effect, and building the network effect is not limitless. On the contrary, money tends to concentrate on a single or a few winners. People want to use the currency everyone else is using.
  - hiq 5y ago
    Your link mention historical correlations that contain the impact of central bank policies, it's not clear to me how well this generalizes to a given and strict supply policy such as the one bitcoin has. > No, they are different pools of supply. I guess we'll see in the long term what happens, I'll just say that the correlations between BTC/USD and ETH/USD make it less than obvious.