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> Here's a pop quiz with a counterintuitive answer: if Bitcoin succeeds at replacing the dollar as both the world reserve currency and the currency of choice fo
by JackFr 5y ago
> Here's a pop quiz with a counterintuitive answer: if Bitcoin succeeds at replacing the dollar as both the world reserve currency and the currency of choice for everyday transactions, what's its fair market value? Most optimists would divide total dollar supply ($21T) by total Bitcoin supply ($21M) and come out with $1M. But the true answer is infinite: if this scenario actually comes to pass, the dollar's value will trend to zero and the question will become meaningless, as you won't be able to trade your dollars for Bitcoin at any price.
That makes no sense. Assuming dollars remain legal tender (note that those words that actually mean something specific and are not synonyms for currency) in the United States, they will always be worth something. Further the fact that there are dozens of currencies in the world which are not typically reserve currencies, but are also not worth zero indicates a gap in your analysis.
- nostrademons 5y agoThis hypothetical assumes dollars do not remain legal tender - at least in the sense that people would not be willing to offer credit denominated in dollars. Currencies have pretty strong network effects - there's a strong incentive to use the one most widely accepted, because you can then spend it in the most places, assuming free trade and common markets. That's why national currencies like the deutschhmark and lira have largely been replaced by the euro. Or, for that matter, why BCH, BSV, and ETC are virtually worthless while Bitcoin and Ethereum's value has skyrocketed.