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Bitcoins are still great, but until their price starts to stabilize, they'll never become cash replacements. Right now, Bitcoins cannot function as a 'store of

Bitcoins are still great, but until their price starts to stabilize, they'll never become cash replacements. Right now, Bitcoins cannot function as a 'store of value' in the sense of currency because they're so volatile.

kiba 14y ago
At the current price level and market cap, stability for bitcoin is still not possible, because bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. Hopefully, the current growth in price is not a bubble.
- nateberkopec 14y ago
  Interesting catch-22/chicken-and-egg there. How can Bitcoin increase the number of people using it if it's still a speculative/risky investment?
  - hnolable 14y ago
    But of course, it's already proven it can do this on at least one scale. Whether or not it can do it on a larger scale is still to be seen.
  - oleganza 14y ago
    This is not a chicken-and-egg problem. Initially there is some value of doing bitcoin: some find it fun, some believe in future growth and do early investment. Sceptical people join later when they see some people already joined. As number of people slowly grows, more people join after them seeing increasing value in the system. So there is no catch-22: system is unrolling completely by itself until everybody is in. If people discover some problems with it, growth or even total demand will go down. See also my comment above about subjective value of gold.
- w0utert 14y ago
  > [..] bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. I'm not so sure if this is 'inevitable' since bitcoins in itself have no value at all. I know the same can be said about fiat money, but at least that's what everyone agrees is legal tender, as opposed to just a bunch of idealists or people who need a way to pay for shady stuff. But bitcoins are not like commodities, or labour, or whatever else has limited supply and non-zero utility. Personally I'm not even touching bitcoins with a 10-foot pole. The day some government decides bitcoins are becoming a real alternative or even a threat to government-controlled money, they will shut the whole gig down and all your bitcoins will be worth nothing. One thing I never understood about bitcoins, is what other problem they solve besides scratching some ideological itch some people have with money controlled by central bankers and governments (which I can imagine are valid concerns for some people). Effectively bitcoins are just like fiat money; worthless tokens that have no intrinsic value besides the trust that some people have in them to hold their value. Trust that is not actually based on anything either. At least the dollar has a government with a big military behind it that can assert their influence on areas where real wealth is concentrated. I'm not saying this is a good thing, just making the observation.
  - ktizo 14y ago
    At least the dollar has a government with a big military behind it Then all you are doing is pegging your wealth to the stability of a nation, which statistically speaking is not that good a bet.
  - mattschoch 14y ago
    You are exactly right that bitcoins are exactly like fiat money, and have no intrinsic value. You actually unintentionally explained what you don't understand. Fiat currency is a problem because it can be so easily manipulated by the governments behind it. Just like the dollar, bitcoins have value only because people believe they have value. Your statement that at least the dollar has a government with big military behind it is exactly what the problem is that bitcoin solves. Bitcoin does NOT have a big government or organization controlling it, so unlike the dollar, no single party can inflate the currency. Central banks are able to create money out of nothing, therefore creating something with perceived value without offering anything of value in exchange (i.e. inflation). That leads to all kinds of problems, as we're seeing with the global economic crisis right now. While Bitcoin does not have any intrinsic value, it also does not have a way to be inflated. The system by design creates DEFLATION instead, so the currency becomes more valuable(infinite divisibility handles issues with deflation). Since there is a finite number of bitcoins that can ever be mined, it acts much more like gold than like the dollar. Gold cannot be inflated by any government. If bitcoins gain mass adoption, then they will begin to look very similar to gold. The main difference being that they are purely digital and have no intrinsic value(thus making gold still a better currency).
- oleganza 14y ago
  One should not forget to mention what one measures the price in. That is, the price of Bitcoin in some products will become more stable over time, but USD and EUR prices may still grow just because USD and EUR will be valued less by producers and consumers. However, today Bitcoin price grows in relation to almost everything because demand for it outgrows the supply.
- adrianwaj 14y ago
  There's one very good thing about a rising bitcoin price that in and of itself makes the rise sustainable: more hackers and bitcoin businesses with more funds to invest into the various aspects of the economy.

kiba 14y ago

At the current price level and market cap, stability for bitcoin is still not possible, because bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. Hopefully, the current growth in price is not a bubble.

nateberkopec 14y ago
Interesting catch-22/chicken-and-egg there. How can Bitcoin increase the number of people using it if it's still a speculative/risky investment?
- hnolable 14y ago
  But of course, it's already proven it can do this on at least one scale. Whether or not it can do it on a larger scale is still to be seen.
- oleganza 14y ago
  This is not a chicken-and-egg problem. Initially there is some value of doing bitcoin: some find it fun, some believe in future growth and do early investment. Sceptical people join later when they see some people already joined. As number of people slowly grows, more people join after them seeing increasing value in the system. So there is no catch-22: system is unrolling completely by itself until everybody is in. If people discover some problems with it, growth or even total demand will go down. See also my comment above about subjective value of gold.
w0utert 14y ago
> [..] bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. I'm not so sure if this is 'inevitable' since bitcoins in itself have no value at all. I know the same can be said about fiat money, but at least that's what everyone agrees is legal tender, as opposed to just a bunch of idealists or people who need a way to pay for shady stuff. But bitcoins are not like commodities, or labour, or whatever else has limited supply and non-zero utility. Personally I'm not even touching bitcoins with a 10-foot pole. The day some government decides bitcoins are becoming a real alternative or even a threat to government-controlled money, they will shut the whole gig down and all your bitcoins will be worth nothing. One thing I never understood about bitcoins, is what other problem they solve besides scratching some ideological itch some people have with money controlled by central bankers and governments (which I can imagine are valid concerns for some people). Effectively bitcoins are just like fiat money; worthless tokens that have no intrinsic value besides the trust that some people have in them to hold their value. Trust that is not actually based on anything either. At least the dollar has a government with a big military behind it that can assert their influence on areas where real wealth is concentrated. I'm not saying this is a good thing, just making the observation.
- ktizo 14y ago
  At least the dollar has a government with a big military behind it Then all you are doing is pegging your wealth to the stability of a nation, which statistically speaking is not that good a bet.
- mattschoch 14y ago
  You are exactly right that bitcoins are exactly like fiat money, and have no intrinsic value. You actually unintentionally explained what you don't understand. Fiat currency is a problem because it can be so easily manipulated by the governments behind it. Just like the dollar, bitcoins have value only because people believe they have value. Your statement that at least the dollar has a government with big military behind it is exactly what the problem is that bitcoin solves. Bitcoin does NOT have a big government or organization controlling it, so unlike the dollar, no single party can inflate the currency. Central banks are able to create money out of nothing, therefore creating something with perceived value without offering anything of value in exchange (i.e. inflation). That leads to all kinds of problems, as we're seeing with the global economic crisis right now. While Bitcoin does not have any intrinsic value, it also does not have a way to be inflated. The system by design creates DEFLATION instead, so the currency becomes more valuable(infinite divisibility handles issues with deflation). Since there is a finite number of bitcoins that can ever be mined, it acts much more like gold than like the dollar. Gold cannot be inflated by any government. If bitcoins gain mass adoption, then they will begin to look very similar to gold. The main difference being that they are purely digital and have no intrinsic value(thus making gold still a better currency).
oleganza 14y ago
One should not forget to mention what one measures the price in. That is, the price of Bitcoin in some products will become more stable over time, but USD and EUR prices may still grow just because USD and EUR will be valued less by producers and consumers. However, today Bitcoin price grows in relation to almost everything because demand for it outgrows the supply.
adrianwaj 14y ago
There's one very good thing about a rising bitcoin price that in and of itself makes the rise sustainable: more hackers and bitcoin businesses with more funds to invest into the various aspects of the economy.