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It is not a question of precision. It is a question of market dynamics. For the sake of explanation, imagine a world where Bitcoin is the only currency. Let's
by sergiosgc 13y ago
It is not a question of precision. It is a question of market dynamics.
For the sake of explanation, imagine a world where Bitcoin is the only currency. Let's also assume that in this world, Bitcoin gains value at 10% per year.
Now, you are an entrepreneur setting up your company. You are going for the grocery retail market, which presents a free cash flow return rate of 8%.
In this scenario, you can't get any investors. Investors are faced with two options: a) Stuff bitcoins under the mattress and get a return of 10% with zero risk; or b) Lend bitcoins to you, get a return of at most 8% (or you'll go broke) and face a non-zero risk that you'll go broke and they lose their beloved bitcoins.
For comparison, with the current economy, currency loses 2-3% per year, so investing in your business has an effective return of 10% to 11%, so if the risk is below this threshold, investment is possible.
- mrfusion 13y agoI know that's the cananocial example, but I've always wondered, wouldn't that 10% appriciation be coming from somewhere? Presumably from the growth of the economy. And if the economy is growing at 10% per year, we probably don't need your grocery store :-) Please correct me if I'm missing something, I took macroeconomics in college but I've forgotten a lot.
- jessaustin 13y ago...imagine a world where Bitcoin is the only currency. Such a world does not exist and never will. Bitcoin is not designed to be the only currency on Earth, if in fact it may be considered a currency at all. It's also not the first asset ever to appreciate in value. For instance, the price of oil rose sharply during the 1970s. Did grocery store investors all decide to pull out of the lucrative grocery sector and go all-in on oil? How did we eat?