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Buy low, sell high. For now, at least. Play out the end of an asset bubble in your head. Lots of people sell their assets, and now have dollars. The job of our
by natrius 12y ago
Buy low, sell high. For now, at least.
Play out the end of an asset bubble in your head. Lots of people sell their assets, and now have dollars. The job of our policy makers is to make sure dollars don't increase in value at all, and don't decrease in value too quickly. But if lots of people are exchanging assets for dollars, the demand for dollars makes the value go up. Our policy makers will take a variety of actions to make their value go down by up to 2% a year. If we're lucky, they'll be able to stave off deflation.
So if you've sold your assets and want to store your value, you really want some sort of ledger with a predictable supply so your value can go up, not stay the same or decrease by 2%. Gold is traditional the ledger that people seek when these sorts of things happen. But enough people will choose Bitcoin to raise the price significantly, which will make others choose it as well.
Gold might be the right bet, but Bitcoin is a more functional ledger (easy to store, easy to transfer, etc.), and the upside is higher. But again, maybe I'm crazy.
- hnnewguy 12y ago>Buy low, sell high. For now, at least. Being as how a transaction requires two parties, this is not possible for everyone.
- tptacek 12y agoThat's a description of a speculative asset, which is a concept that's orthogonal to a store of value. For instance, a speculative asset that plummets in value can be valuable (to short sellers and put option holders). In particular: the effectiveness of a store of value is based on its ability to retain its value over time. The effectiveness of a speculative asset is based on its users ability to transact based on predictions (up or down) of its future value, regardless of its true value.
- natrius 12y agoThat's a good point; perhaps I was a bit loose with words. Its killer app is that it's a great speculative asset.
- tptacek 12y agoOkay, but that is also (not being snarky) the killer app of a deck of cards.
- natrius 12y agoDo you have any thoughts on the scenario I described?
- tptacek 12y agoBitcoin is an especially bad store of value. It is subject to stark and unpredictable devaluation, followed by manic upswings that increase its volatility and harm its utility to normal business, which selects out the boring currency users that would be the backbone of a sane valuation and selects in toxic speculators that amplify its volatility in the next iteration of the cycle.