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In the long run, yes, there could be a bright future for BTC. In the short run, there are several big challenges, liquidity being a huge one. When it comes to

In the long run, yes, there could be a bright future for BTC. In the short run, there are several big challenges, liquidity being a huge one. When it comes to BTC, the activities of speculators/hoarders, and the activities of free exchange and commerce, have shown themselves to be in direct opposition so far. The "store of value" and the "medium of exchange" are not mutually exclusive, of course, but for the time being, they're functionally mutually exclusive. It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two. It's in the best, long-term interests of BTC to stabilize and become the latter. But BTC is going to be the former for quite awhile, precisely because it's so mysterious in the public eye, there's such information asymmetry about how it works, and because the markets for BTC-based commerce are still fairly niche. Stabilization is going to come when more businesses start accepting BTC, and accordingly, when BTC becomes more freely convertible for goods, services, and other currencies. Until then, it'll proceed apace slowly and steadily, with the occasional burst of volatility as public interest spikes and wanes, and as speculators jump in and out. What the currency really needs is exchange volume -- not just from trading, but from commerce.

fredwilson 14y ago
Exactly
derefr 14y ago
> It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two. Where is gold on that spectrum? As far as I can tell, Bitcoin seems to have all the properties of gold (except that it's easier to transport.) I'm pretty sure that gold is not considered to be a "currency" in any sense in the modern era; it's traded as a commodity, like oil. But people still can use it (or any other commodity, like oil--or, say, laundry detergent[1]) for under-the-table anonymous transactions as well. [1] http://www.thedaily.com/page/2012/03/12/031212-news-tide-theft-1-4/ http://www.thedaily.com/page/2012/03/12/031212-news-tide-the...
- thatthatis 14y ago
  The gold analogy is apt, but I think diamonds are a more apt analogy. Diamonds capture the "value is what people are willing to pay" aspect better than gold does.
- jonnathanson 14y ago
  "Bitcoin seems to have all the properties of gold" It's an interesting analogy, though there are a few key differences. Gold is a physical good, it has industrial uses, and it can be made into other materials and value-added goods (jewelry, etc.). There's no intrinsic value to gold (aside from the aforementioned industrial uses), other than the fact that it's rare, shiny, and resistant to tarnish. Once the world moved away from the gold standard, gold ceased to function like a currency and started functioning almost strictly as a commodity. The distinction between the two depends on liquidity, which depends on how freely gold can be converted for goods and services in most markets (it can't). Interestingly, most people who buy "gold" don't actually take possession of the material; they buy and sell contracts based on gold, or they buy and sell funds invested in gold-mining operations. The idea that people can just buy strips or bars of gold, and use them to transact, is theoretically true, but practically very difficult. [On a side note: quite a few of the people buying "gold" under the auspices that it'll hold its value if/when a Great Depression, WW3, nuclear apocalypse, etc., takes place, would be in for a rude awakening if such a scenario came to pass. Most of them don't have the actual metal, and they almost certainly wouldn't be able to access it if the shit hit the fan].

fredwilson 14y ago

Exactly

derefr 14y ago

> It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two. Where is gold on that spectrum? As far as I can tell, Bitcoin seems to have all the properties of gold (except that it's easier to transport.) I'm pretty sure that gold is not considered to be a "currency" in any sense in the modern era; it's traded as a commodity, like oil. But people still can use it (or any other commodity, like oil--or, say, laundry detergent[1]) for under-the-table anonymous transactions as well. [1] http://www.thedaily.com/page/2012/03/12/031212-news-tide-theft-1-4/ http://www.thedaily.com/page/2012/03/12/031212-news-tide-the...

thatthatis 14y ago
The gold analogy is apt, but I think diamonds are a more apt analogy. Diamonds capture the "value is what people are willing to pay" aspect better than gold does.
jonnathanson 14y ago
"Bitcoin seems to have all the properties of gold" It's an interesting analogy, though there are a few key differences. Gold is a physical good, it has industrial uses, and it can be made into other materials and value-added goods (jewelry, etc.). There's no intrinsic value to gold (aside from the aforementioned industrial uses), other than the fact that it's rare, shiny, and resistant to tarnish. Once the world moved away from the gold standard, gold ceased to function like a currency and started functioning almost strictly as a commodity. The distinction between the two depends on liquidity, which depends on how freely gold can be converted for goods and services in most markets (it can't). Interestingly, most people who buy "gold" don't actually take possession of the material; they buy and sell contracts based on gold, or they buy and sell funds invested in gold-mining operations. The idea that people can just buy strips or bars of gold, and use them to transact, is theoretically true, but practically very difficult. [On a side note: quite a few of the people buying "gold" under the auspices that it'll hold its value if/when a Great Depression, WW3, nuclear apocalypse, etc., takes place, would be in for a rude awakening if such a scenario came to pass. Most of them don't have the actual metal, and they almost certainly wouldn't be able to access it if the shit hit the fan].