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Many currencies in existence are now riskier and less stable than Bitcoin. Yes, it's true. As of right now, there are 182 official currencies worldwide[1], mo

by cs702 14y ago

Many currencies in existence are now riskier and less stable than Bitcoin. Yes, it's true. As of right now, there are 182 official currencies worldwide[1], most of which you've never heard of in your life, and many of which have total market capitalization lower than Bitcoin.[2] Others are subject to extreme sociopolitical, economic, or military-conflict risks. Would you rather own bitcoins, which are traded globally, or, say, Libyan dinars, North Korean wons, Syrian pounds, etc.? Even the US dollar and euro, supposedly bastions of stability, have seen their exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100% jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today.[3] If Bitcoin survives the horrific economic crises in countries like Spain, Greece, and Cyprus, and the even more horrific military conflicts in countries like Syria and Sudan, it will continue gaining credibility as the currency of last resort -- the global digital commodity that will survive even if your country or economy goes to hell. -- Edit: changed "most currencies in existence" to "many currencies in existence," which is what I actually intended to write. -- PS. I posted this on the other thread linking to the same article: https://news.ycombinator.com/item?id=5486100 https://news.ycombinator.com/item?id=5486100 -- [1] http://en.wikipedia.org/wiki/List_of_circulating_currencies_by_country http://en.wikipedia.org/wiki/List_of_circulating_currencies_... [2] http://reason.com/24-7/2013/04/01/at-1b-bitcoin-holds-more-value-than-20-n http://reason.com/24-7/2013/04/01/at-1b-bitcoin-holds-more-v... [3] https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1364991894838&chddm=1773204&q=CURRENCY:EURUSD&ntsp=0&ei=gh9cUaDRGbKr0AG8tQE https://www.google.com/finance?chdnp=1&chdd=1&chds=1...

carbocation 14y ago
> Even the US dollar and euro, supposedly bastions of stability, have seen their exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100% jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today.[3] The USD and the Euro, in comparison to BTC, are magnificently stable. Sure USD/Eur changed in relative value by 100% over the course of 6 years after the inception of the Euro. That's very stable for a new currency, especially in contrast to bitcoin. The BTC/USD rate has changed by 400% over the past 30 days.
- ok_craig 14y ago
  I don't think even bitcoin enthusiasts are saying bitcoin will be stable in the near future. Only that once it's widely adopted and reaches its growth potential or near it, it will then be stable. If it is to be adopted widely, at some point it has to go from being distributed among a few million, to being distributed among a few billion. The continual price rise will correlate with that adoption continuing to happen. So yeah, I understand all these arguments about volatility, but the reason they don't bother me is because they don't seem to point out anything bad about bitcoin in principle, in the long-term, they only point out the negative aspects of using it as a currency while its undergoing its adoption phase. I don't think there's actually any argument that using bitcoin as a currency right now isn't going to work as well as dollars/euros.
  - DavidSJ 14y ago
    In the short term, 90% of bitcoin's value is driven by speculation of future adoption, as you say. If it does become widely adopted, it should be far less volatile than it is today, but it will remain more volatile than well-managed fiat like the dollar, since the supply of bitcoin is inelastic and therefore cannot react to fluctuations in demand. So, it might end up looking more like gold, rather than a "demented Internet stock", but it'll never be as stable as the dollar is today.
    - fnordfnordfnord 14y ago
      >but it'll never be as stable as the dollar is today. That's right, and it's a feature, not a bug.
      - knowaveragejoe 14y ago
        That's really not a feature for anyone.
        taligent 14y ago
        Except speculators and day traders.
Guvante 14y ago
Bitcoins look interesting but the current price shift caused by interest in them is disturbing. Mining on anything but a current generation AMD card isn't worth the electricity and the advent of ASIC cards is going to make mining on any consumer hardware pointless. So you can't mine and you can't buy without exposing yourself to a lot of risk right now. Given the current bubble is based on people joining the game , that is a risky proposition for bitcoins as a whole.
- fc2 14y ago
  You forget people can join the game by just accepting BTC as payment for their goods and services.
  - betterunix 14y ago
    Since I actually pay taxes (you know, that thing adults do), I doubt that this will work for me.
    - DennisP 14y ago
      Adults who understand taxes know that if they receive payment in something other than dollars, whether it's foreign currency, gold, bitcoins, or barter goods, it's up to them to pay taxes on the dollar value of it.
      - betterunix 14y ago
        Right, and that is the point: even if you accept Bitcoin payments, you still need to eventually get USD. Ultimately, this is why I believe that Bitcoin cannot survive with the Bitcoin exchanges.
        BrokenPipe 14y ago
        Right, and that is the point: even if you accept Gold payments, you still need to eventually get Euro. Ultimately, this is why I believe that Gold cannot survive with the Gold exchanges.
hazov 14y ago
I think there's too much wishful thinking in your analysis, first people that are really rich are only interested in two things, one is that their wealth do not lose value, they will go to bitcoin, private equity, platinum, dollars, North Korean wons, stocks, fixed income titles, futures, whatever only to have this as a guarantee. The second is to increase their wealth. Now your post appears to talk about the first point, which I agree, I only do not see how you jump to the conclusion that bitcoin is more stable than Swiss francs for example, stability is the guarantee that you'll not lose money if you trade all your wealth from one state to another, I do not see how bitcoin guarantees that (no store of value does), the only real alternative to not lose value is diversification, put your money in as many different things as you possibly could, never let a bank have more than 20% of your entire cash money, buy as many different investments as you could, precious metals, stocks, solid bonds and let them be on safes or clearing houses that's not attached to a bank. And most important stay away from banks from countries with large public debt.
rjtavares 14y ago
I wouldn't own Libyan dinars unless I lived in Libya. Since I don't live on the Internet, I won't own Bitcoins.
- carbocation 14y ago
  Multinational corporations use foreign currencies as a hedge against exchange rate fluctuations. Speculators win and lose big on bets re: exchange rates. Owning foreign currency can make sense for a variety of reasons. And while I don't live on the Internet, I do conduct some of my economic life on the Internet: buying, selling, consuming, and creating.
  - rjtavares 14y ago
    > Multinational corporations use foreign currencies as a hedge against exchange rate fluctuations Because they have business there, so in a sense they do live there. > And while I don't live on the Internet, I do conduct some of my economic life on the Internet: buying, selling, consuming, and creating. Maybe that's the logic leap I have to take to use bitcoins: I don't consider that I buy things from the Internet, I use the Internet to buy things from stores. Maybe when we have a Snow-Crash-type Metaverse I'll start using virtual currencies :)
- meerita 14y ago
  Many people pays their loans in Yens or other currencies just to save money. Argentinians for example are best know for putting all savings in american dollars.
  - rjtavares 14y ago
    People also put their savings in Apple stock. That doesn't make it currency...
    - meerita 14y ago
      Sorry to correct you: Currency is something that is used as a medium of exchange; money. Anything can be a currency from day to night.
pseut 14y ago
> Even the US dollar and euro, supposedly bastions of stability, have seen their exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100% jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today. If we needed to buy everything in the US but store all of our wealth in Euros, this would be the right comparison. But since we don't, "stability" means low and predictable inflation for the Euro and the dollar. The exchange rate matters for Bitcoin because wages, goods, and services are all denominated in non-Bitcoin currency. Look at inflation over the same period and you'll see that the dollar really is a "bastion of stability" (in that narrow sense, the Euro is too... but the Euro's got other problems beyond the scope of this discussion that make me reluctant to vigorously defend its stability).
rrrrtttt 14y ago
You're presenting a strawman. The choice for Lybians and Syrians isn't between their local currency and Bitcoins, it's between the local currency, Bitcoin and one of the first-world currencies. And people in the third world have been choosing to hold USD for decades. In fact your comparison exposes the biggest problem with Bitcoin: it's a solution in search of a problem. The USD has a long track record as the best managed currency in the world. The 70's stagflation debacle was a minor hiccup by world standards, and the current quantitative easing policy is nothing. Why would anyone in their right mind convert their dollars into Internet funny money? I mean, sure, back in 2009 when Bitcoin started, people were panicking having witnessed the Lehman collapse and TARP. But now we know the world isn't coming to an end, so why bother?
- tolmasky 14y ago
  This is not true, or at the very least, only true of the higher echelons of society. I can't speak about Libya, but in Argentina there are currently currency controls against USD. As a (non-politically connected) Argentinian citizen it is incredibly difficult to hold USD right now. This btw is not new, it happens every time Argentina goes into its ~9 year bust cycle. I think the issue is that you are speaking from a position of comfort from the US. Of course USD seems fine to you, the US suffers the least in all these recessions. But for people outside the US, they often see their entire life's savings vanish. In Argentina inflation is not something that is only academically talked about, it has a real effect on every day life, the government understands this (and exploits it), and thus works hard to prevent everyone from fleeing the currency. Bitcoin does offer a real new alternative in this regard. Whether it will prove to be any better is admittedly an open question, but the idea that USD is some saving grace for foreigners is naive.
  - rrrrtttt 14y ago
    You're incorrect about me. I live in a country that went through hyperinflation a few decades ago, and I was born in another country whose currency was wiped out in the late 90's. In both of these places society responded by converting de facto to US dollars. People would stuff their mattresses with dollars and prices for anything other than groceries would be named in dollars. Sure Bitcoin offers an alternative if you live under a regime that can tell you what kind of currency you can hold, but wouldn't that sort of a regime also crack down on holders of Bitcoin if that were to catch on? P.S. Correct me if I'm wrong, but didn't Argentina go through a dollarization phase at some point?
deleted 14y ago
[deleted]
brown9-2 14y ago
Even the US dollar and euro, supposedly bastions of stability, have seen their exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100% jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today.[3] Are these movements different than a historical norm? You provide numbers with no context - it seems as if a movement of 100% in 6 years is meant to be shocking because 100% is a big number.

by cs702 14y ago

carbocation 14y ago

ok_craig 14y ago
I don't think even bitcoin enthusiasts are saying bitcoin will be stable in the near future. Only that once it's widely adopted and reaches its growth potential or near it, it will then be stable. If it is to be adopted widely, at some point it has to go from being distributed among a few million, to being distributed among a few billion. The continual price rise will correlate with that adoption continuing to happen. So yeah, I understand all these arguments about volatility, but the reason they don't bother me is because they don't seem to point out anything bad about bitcoin in principle, in the long-term, they only point out the negative aspects of using it as a currency while its undergoing its adoption phase. I don't think there's actually any argument that using bitcoin as a currency right now isn't going to work as well as dollars/euros.
- DavidSJ 14y ago
  In the short term, 90% of bitcoin's value is driven by speculation of future adoption, as you say. If it does become widely adopted, it should be far less volatile than it is today, but it will remain more volatile than well-managed fiat like the dollar, since the supply of bitcoin is inelastic and therefore cannot react to fluctuations in demand. So, it might end up looking more like gold, rather than a "demented Internet stock", but it'll never be as stable as the dollar is today.
  - fnordfnordfnord 14y ago
    >but it'll never be as stable as the dollar is today. That's right, and it's a feature, not a bug.
    - knowaveragejoe 14y ago
      That's really not a feature for anyone.
      - taligent 14y ago
        Except speculators and day traders.

Guvante 14y ago

Bitcoins look interesting but the current price shift caused by interest in them is disturbing. Mining on anything but a current generation AMD card isn't worth the electricity and the advent of ASIC cards is going to make mining on any consumer hardware pointless. So you can't mine and you can't buy without exposing yourself to a lot of risk right now. Given the current bubble is based on people joining the game , that is a risky proposition for bitcoins as a whole.

fc2 14y ago
You forget people can join the game by just accepting BTC as payment for their goods and services.
- betterunix 14y ago
  Since I actually pay taxes (you know, that thing adults do), I doubt that this will work for me.
  - DennisP 14y ago
    Adults who understand taxes know that if they receive payment in something other than dollars, whether it's foreign currency, gold, bitcoins, or barter goods, it's up to them to pay taxes on the dollar value of it.
    - betterunix 14y ago
      Right, and that is the point: even if you accept Bitcoin payments, you still need to eventually get USD. Ultimately, this is why I believe that Bitcoin cannot survive with the Bitcoin exchanges.
      - BrokenPipe 14y ago
        Right, and that is the point: even if you accept Gold payments, you still need to eventually get Euro. Ultimately, this is why I believe that Gold cannot survive with the Gold exchanges.

hazov 14y ago

I think there's too much wishful thinking in your analysis, first people that are really rich are only interested in two things, one is that their wealth do not lose value, they will go to bitcoin, private equity, platinum, dollars, North Korean wons, stocks, fixed income titles, futures, whatever only to have this as a guarantee. The second is to increase their wealth. Now your post appears to talk about the first point, which I agree, I only do not see how you jump to the conclusion that bitcoin is more stable than Swiss francs for example, stability is the guarantee that you'll not lose money if you trade all your wealth from one state to another, I do not see how bitcoin guarantees that (no store of value does), the only real alternative to not lose value is diversification, put your money in as many different things as you possibly could, never let a bank have more than 20% of your entire cash money, buy as many different investments as you could, precious metals, stocks, solid bonds and let them be on safes or clearing houses that's not attached to a bank. And most important stay away from banks from countries with large public debt.

rjtavares 14y ago

I wouldn't own Libyan dinars unless I lived in Libya. Since I don't live on the Internet, I won't own Bitcoins.

carbocation 14y ago
Multinational corporations use foreign currencies as a hedge against exchange rate fluctuations. Speculators win and lose big on bets re: exchange rates. Owning foreign currency can make sense for a variety of reasons. And while I don't live on the Internet, I do conduct some of my economic life on the Internet: buying, selling, consuming, and creating.
- rjtavares 14y ago
  > Multinational corporations use foreign currencies as a hedge against exchange rate fluctuations Because they have business there, so in a sense they do live there. > And while I don't live on the Internet, I do conduct some of my economic life on the Internet: buying, selling, consuming, and creating. Maybe that's the logic leap I have to take to use bitcoins: I don't consider that I buy things from the Internet, I use the Internet to buy things from stores. Maybe when we have a Snow-Crash-type Metaverse I'll start using virtual currencies :)
meerita 14y ago
Many people pays their loans in Yens or other currencies just to save money. Argentinians for example are best know for putting all savings in american dollars.
- rjtavares 14y ago
  People also put their savings in Apple stock. That doesn't make it currency...
  - meerita 14y ago
    Sorry to correct you: Currency is something that is used as a medium of exchange; money. Anything can be a currency from day to night.

pseut 14y ago

> Even the US dollar and euro, supposedly bastions of stability, have seen their exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100% jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today. If we needed to buy everything in the US but store all of our wealth in Euros, this would be the right comparison. But since we don't, "stability" means low and predictable inflation for the Euro and the dollar. The exchange rate matters for Bitcoin because wages, goods, and services are all denominated in non-Bitcoin currency. Look at inflation over the same period and you'll see that the dollar really is a "bastion of stability" (in that narrow sense, the Euro is too... but the Euro's got other problems beyond the scope of this discussion that make me reluctant to vigorously defend its stability).

rrrrtttt 14y ago

You're presenting a strawman. The choice for Lybians and Syrians isn't between their local currency and Bitcoins, it's between the local currency, Bitcoin and one of the first-world currencies. And people in the third world have been choosing to hold USD for decades. In fact your comparison exposes the biggest problem with Bitcoin: it's a solution in search of a problem. The USD has a long track record as the best managed currency in the world. The 70's stagflation debacle was a minor hiccup by world standards, and the current quantitative easing policy is nothing. Why would anyone in their right mind convert their dollars into Internet funny money? I mean, sure, back in 2009 when Bitcoin started, people were panicking having witnessed the Lehman collapse and TARP. But now we know the world isn't coming to an end, so why bother?

tolmasky 14y ago
This is not true, or at the very least, only true of the higher echelons of society. I can't speak about Libya, but in Argentina there are currently currency controls against USD. As a (non-politically connected) Argentinian citizen it is incredibly difficult to hold USD right now. This btw is not new, it happens every time Argentina goes into its ~9 year bust cycle. I think the issue is that you are speaking from a position of comfort from the US. Of course USD seems fine to you, the US suffers the least in all these recessions. But for people outside the US, they often see their entire life's savings vanish. In Argentina inflation is not something that is only academically talked about, it has a real effect on every day life, the government understands this (and exploits it), and thus works hard to prevent everyone from fleeing the currency. Bitcoin does offer a real new alternative in this regard. Whether it will prove to be any better is admittedly an open question, but the idea that USD is some saving grace for foreigners is naive.
- rrrrtttt 14y ago
  You're incorrect about me. I live in a country that went through hyperinflation a few decades ago, and I was born in another country whose currency was wiped out in the late 90's. In both of these places society responded by converting de facto to US dollars. People would stuff their mattresses with dollars and prices for anything other than groceries would be named in dollars. Sure Bitcoin offers an alternative if you live under a regime that can tell you what kind of currency you can hold, but wouldn't that sort of a regime also crack down on holders of Bitcoin if that were to catch on? P.S. Correct me if I'm wrong, but didn't Argentina go through a dollarization phase at some point?

deleted 14y ago

[deleted]

brown9-2 14y ago

Even the US dollar and euro, supposedly bastions of stability, have seen their exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100% jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today.[3] Are these movements different than a historical norm? You provide numbers with no context - it seems as if a movement of 100% in 6 years is meant to be shocking because 100% is a big number.