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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 volat
by 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 agoThat's really not a feature for anyone.
- taligent 14y agoExcept speculators and day traders.
- fnordfnordfnord 14y agoThen hold Dollars.
- BrokenPipe 14y agoWell said. I've had enough of this inflation. The poorer you are, the less likely you have money in any investment that is yields better results that inflation. The richer you are, the more likely you have your money both diversified and invested with good ROI.
- redblacktree 14y agoThe poorer you are, the less likely you are to have wealth to protect from inflation. If wages would keep pace with inflation, there would be no problem at all. To my mind, there is a wage problem for the poor, not an inflation problem. Those that do have wealth to protect should be encouraged to use it for productive investments. Mild inflation is one way to do that, and it is healthy. Massive inflation to fund overseas adventurism on the other hand, is not healthy. As the author of this piece correctly points out, deflation leads to hording behavior. In a world where everyone used bitcoin, the wealth disparity would only grow faster.
- danielweber 14y agoInflation helps for capital and labor. It forces capital to be involved, and it lets labor be devalued. Wages are extremely sticky, but only nominally.
- fnordfnordfnord 14y agoWage increases always lag inflation. In a market a with huge labor surplus, wages may lag longer than many can tolerate.
- DavidSJ 14y agoElasticity of supply and inflation rate are two completely orthogonal concepts. A deflationary currency can still have elastic supply, and an inflationary currency can still have inelastic supply. Elasticity simply refers to whether the supply can react to price. In bitcoin's case, it cannot, since the supply is determined by an algorithm.
- ok_craig 14y agoAll I'm saying is that right now, while it's being adopted, growth and volatility are the same thing. Sentiments along the lines of: "For bitcoin to be adopted, it should be stable first" don't make sense, because adoption (demand) drives the instability. That statement is the equivalent of saying "For bitcoin to grow, it should not be growing."