10 ms·

But it is not that black and white, is it? While it is quite clear that Bitcoin has "value" as long as people are willing to trade it (i.e., indefinitely), the

• Joeri 13y ago
  The value of a currency lies entirely in the perception of that value. I don't consider bitcoin different from a traditional currency, except that its rate of production is known in advance. It will keep having value because by now enough people think it does.
  • fragsworth 13y ago
    It's in a strange position right now, though. Its value is not based on anything that makes any sense. Public perception - yes - but public perception of what? Nothing is priced in bitcoin. Once things begin to be priced in bitcoin, proponents hope its value will stabilize. This might happen. It did with fiat, but fiat had the advantage of a stable start and slow detachment from gold. The real funny thing to me is, I believe the currency could do its job just as well no matter what the value per bitcoin. And I don't think volatility matters at all, because companies like BitPay assume the volatility risk for you (both the merchant and the consumer) I don't know that bitcoin can be used as a store of value, especially for future adopters. But it is definitely a great method for real transactions of wealth.
    • dasil003 13y ago
      > I don't know that bitcoin can be used as a store of value, especially for future adopters. All else being equal, it seems to be designed to be a perfect store of value because it is deflationary by design. Obviously it is far more volatile and risky than something backed by major world governments at this stage, however it does come with certain guarantees that no central bank could credibly make (if the crypto holds). For people who have had their wealth stolen by governments this could prove a very attractive pull.
  • this_user 13y ago
    Bitcoin is different in that is the purest form of a fiat currency in the sense that it is backed by nothing and thus has no intrinsic value whatsoever. Traditional currencies, on the other hand, are at least fractionally backed by (usually) gold and government bonds which in itself are backed by a government's ability to tax its citizens. There is also a second problem in that BTC is deflationary by design. Deflation leads to hoarding of currency units while reducing the velocity of money and suffocating the economy. Most people will agree that deflation is the worst thing that can happen to an economy which is why central banks will do everything in their power to avert it. It is hard to imagine how a stable Bitcoin economy could develop under these inherently flawed circumstances.
    • dragonwriter 13y ago
      > Bitcoin is different in that is the purest form of a fiat currency in the sense that it is backed by nothing and thus has no intrinsic value whatsoever. Well, no, its not; the purest form of fiat currency is a currency backed purely by government fiat (hence the name). Bitcoin is one of the purest forms of speculative "currency".
    • ericb 13y ago
      You could argue that deflation is the cure to consumerism, and the start of environmentalism. HDTV's have had strong deflation for years, but I still have one.
      • dasil003 13y ago
        I like your first point, but your second point makes no sense. Products are not currency, and talking about inflation/deflation in products does not make sense, unless people buy them as a long-term value-store in which case "assets" might be more appropriate. Except they're still not fungible so they can appreciate or depreciate, but that's not inflation or deflation.
        • ericb 13y ago
          To explain: The fear that often is associated with deflationary currency (like bitcoin) is that no one will spend it, because waiting always gets you a slightly better deal. And if that happens the economy will grind to a halt with everyone waiting to spend. The point of my second statement is that we have examples of cases where even though every month your money buys more, people still do buy things.
  • jaxn 13y ago
    This is where the bitcoin boosters start to seem a little looney to me. 99% of my experience with currency has been with USD, which have been relatively stable from month to month. It is a difficult situation because it appears that when people take the time to learn about it, they become big fans of bitcoin but also start worrying about the total collapse of the fed and the USD. I am trying to understand the argument, but I remain skeptical. It is very interesting to watch and play with though.
    • notahacker 13y ago
      People who take the time to learn about "alternative medicine" usually end up (or start off) sceptical about evidence-based medicine...
      • yankoff 13y ago
        And your claim, of course, is not based on any evidence.
        • notahacker 13y ago
          If you actually think there is any possibility that my unsupported assertion that people committed to therapies like homeopathy or reiki are generally a bit less enthused with medical testing and conventional medicine than the general population is incorrect, please feel free to make that argument...
    • vkou 13y ago
      I can say, with 100% that the USD, and the fed will collapse. Nothing lasts forever - and if anyone argues otherwise, I've got some Roman Denarius to sell them (At twice the price of their gold content). Whether or not this happens in my lifetime, and whether BTC is worth speculating on is another question altogether.
      • saalweachter 13y ago
        I will happily buy all of them at those terms. (Denarii was a silver currency.)
  • Pitarou 13y ago
    No. If somebody sues me, and I offer to pay my debt in bitcoins, the court may refuse to recognise this payment. But if I pay in the national currency, the court is required to recognise this payment. This is part of the legal system in every country. It's one of the mechanisms governments use to force citizens to use the national currency.
    • yen223 13y ago
      Sounds like a sensible notion too, otherwise I'd be paying all my fines with Reddit karma.
• ericb 13y ago
  The fluctuations are a result of it's size. Currently the monetary base hasn't expanded enough to even cover the market cap of a single company the size of Tesla. At scale, things gain stability. If a newborn loses a pound, that's 10% of their weight. If I do, it is .5% of mine.
  • Steko 13y ago
    I'm sure there are currencies with a similarly sized monetary base but which are far more stable. Bitcoin's track record as a currency is pretty laughable but just big enough to provide a nice bullet point for the Bitcoin investment vehicle/get rich quick scheme sales pitch.
    • ericb 13y ago
      Perhaps similar in size, but not in newness (the market needs to sort out fair value), untested exchanges, difficulty of moving money in and out. These are early adopter challenges, but they are also sources of volatility.
      • Steko 13y ago
        Bitcoin's volatility seems to be entirely a function of demand. People buy it because the price is going up. People sell it because they want to take profits or are scared the price is dropping. You'd be crazy to use it right now for legal goods and services. The view of many Bitcoin critics (including myself) that it's horrible as a currency but a massive success as an investment vehicle seems stronger than ever.
        • MarkPNeyer 13y ago
          you'd be crazy to buy hosting anonymously - especially if your government protects its people from bad ideas you'd be crazy to buy weapons anonymously - especially if your government protects its people from harm by keeping them unarmed you'd be crazy to trust mathematics more than governments because governments never lie, whereas numbers are made up all the time
• sliverstorm 13y ago
  there is still no reason to assume that it will ever stop having these extreme fluctuations. Actually I was thinking about this yesterday, and I think if/when goods start to be priced in BTC (not just "fixed USD value converted to current BTC equivalent") that could help anchor the value of BTC.
  • Jtsummers 13y ago
    This is likely the key to BTC value stability, but at present it's still over the horizon. The number of users continues to increase, the supply of BTC continues to increase. It's still being used as a speculative investment/commodity. Once the number of users becomes more stable (or the growth rate is less jumpy) and the speculation quiets down (to be more like a forex market?), then it'll be feasible for vendors to stick to a price with less risk of getting hosed or hosing their clients.
  • slg 13y ago
    The problem is that few people are willing to fix their price to a BTC value because it is so unstable. It is a chicken and egg problem.
    • sliverstorm 13y ago
      Absolutely! A first step could be updating prices periodically, perhaps on an hourly or daily basis, rather than every second.
      • jzwinck 13y ago
        Just like Zimbabwe in the good old days of 2008, "updating" prices constantly would have deleterious effects on purchasing by normal people. When prices in some system have to be updated constantly to reflect another metric (say, USD), it may be more efficient to just use that other metric in the price. This is what happened in Zimbabwe.
        • sliverstorm 13y ago
• nationcrafting 13y ago
  >there is still no reason to assume that it will ever stop having these extreme fluctuations. Think of the difference in waves occurring in a big pool vs a little pool, when a person of the same weight dive in it. In a little pool, a person dives, the waves are proportionally very big. In a big pool, the person diving hardly affects the water in its totality. The same applies to Bitcoin. The more each coin is worth, the less big buyers and sellers will impact the overall market. So, if Bitcoin had a total market capitalisation of, say, 10 trilliion, then even big players would only affect a few Satoshi as they buy in and out of the market, therefore the fluctuations would decrease. Of course, there's still be people who had held on to their coins from the very beginning, so their leverage on the total market would be big, still. But such people would be very few and far between, because everyone has a selling point. Also, it wouldn't be in their interest to rock the boat very much, just as it isn't in any central bank to buy too much gold in one go, because their movements affect the market price much more than people buying and selling at the margin.