That's one of the standard metrics to judge any currency. Bitcoin is not advertised as an asset but as a digital currency. But it has clearly become primarily an asset, given the minimal uses of it as a currency.

Once transaction fees exceeded $20 back in 2017, it was pretty clear Bitcoin was an asset not a currency.

Horrible properties for a currency. Usual properties for a collectible asset.

I'd argue that IRS tax treatment of Bitcoin as an asset (and thus making every currency-like purchase - even when exchanging for good or services - a taxable event) is another significant factor.

Fees may have made this inevitable, but having to deal with taxes has definitely made me much more wary of using it for small purchases. Bitcoin tax accounting is tedious, and I think once a company solves non-custodial record keeping for the purposes of automated tax accounting, it will increase velocity of spending.

The IRS treats essentially everything ownable as an asset: gold, paper currency, bitcoin, art, postage stamps.

You obviously never pay capital gains tax on USD, because it never changes value relative to USD.

AFAIK a Bitcoin is no different than a Euro tax-wise.

There's a gigantic difference: an exemption for almost all personal transactions. In practice almost every foreign currency transaction you make is exempt[1]. The IRS doesn't allow that exemption for Bitcoin and technically you are required to calculate and report gains for every single Bitcoin transaction you make (regardless of whether dollars are involved). Imagine reporting every Starbucks purchase on your tax return. It's a completely unreasonable burden for a currency.

[1] The actual rule is $200 of capital gains per transaction, and you'd usually have to spend substantially more than $1000 in a single transaction to get there.

No, the $200 limit is the limit on the exchanges for the year.

EUR/USD exchange rate changed 3-4% from a year ago, so spending $5-6k in Euros would surpass the threshold (though in this particular case, as a loss).

The BTC/USD exchange rate more than doubled over the past year, so you'd have to spend less than a few hundred dollars to remain under <$200 gains.

The $200 tax exemption would make little practical difference. Even for traditional stable currencies, it's relatively easy to exceed that in any significant use. And with BTC's historical volatility, it's virtually guaranteed.

I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services.

Am I wrong? Have never held any significant amount of foreign currency, so have never dealt with this personally.

My understanding is that a gain or loss in that currency is recognized upon spending/trading it.

Quick search brought me to https://thismatter.com/money/tax/foreign-currency-transactio... which agrees with that.

Like use tax, I suspect it is often just neglected.

Interesting, thanks for correcting me.

It looks like there may be an exemption for small amounts under $200 (https://smallbusiness.chron.com/foreign-currency-exchange-ta...), which would make Bitcoin much more functional (if it would apply to Bitcoin anyways, mute point as BTC is classified as an asset), but not to the extent of my misconception.

The lack of a de minimis exemption for bitcoin is key here, and a major way in which it's not treated like a foreign currency.

Yeah there is specific tax code for gains on foreign currency. It is actually worse than capital gains tax. https://smallbusiness.chron.com/irs-tax-laws-regarding-forei...

Bitcoin can't be a currency until it is legal to use as a form of tender.

These days, I see bitcoin like the ivory trade. Plenty of it out there, not much public movement, and it is illegal to do with it what everyone wants to do with it. So people are hoarding it while appearing to distance themselves from it for tax/legality purposes. I no longer look into this topic too regularly so this may be a naive thing to say, but there are far more naive people than me out there with money in bitcoin...

That same standard exists for currencies too!

How much of M0 is of the total supply

How does everyone walk past good criticisms of bitcoin and bang their head against a wall of the dumbest criticisms ever? I mean specifically holding Bitcoin to a fictional higher standard that no asset satisfies just because they dont respect that particular asset

Because Bitcoin is (at least theoretically) a currency. You're comparing it to a commodity or store of value.

The power of a currency is the ability to trade it for goods and services. If that is no longer happening with Bitcoin it has morphed into something else entirely.

I've never owned or traded bitcoin, but as I understand it the main attraction is that it's like the gold standard (of course for people who don't understand why the gold standard was a bad idea).

Gold standard is great for individuals who want to store wealth, but a bad idea for a fiat currency with policy goals like increasing spending, investment and economic velocity. Deflationary currencies are good stores of value, but slow the economy (because why invest/buy now if your money gets more powerful the longer you refrain from spending it).

I think Bitcoin is similar to the gold standard, and its popularity lies in the mismatch of goals between government desires for fiat issuance and individuals for storing value.

> Deflationary currencies are good stores of value, but slow the economy (because why invest/buy now if your money gets more powerful the longer you refrain from spending it).

Logically speaking it is irrelevant; instead of holding gold and calling it money an investor can still hold gold except it gets called an investment; but their holding will perform the same way because it is linked to the value of gold. The practical difference is tax treatment which gets complicated. Theoretically if I recall expected inflation/deflation in the currency doesn't change the economic equilibrium because everyone just factors it in to the interest rates and salary negotiations to keep the focus on real value.

And in execution any consistent % inflation/deflation of the money supply makes things weird and confusing because the measuring stick used to measure wealth keeps changing.

Bitcoin attracts three different niche markets:

- Crypto enthusiasts who are infatuated with the technology or the math involved

- Anti-Fed Libertarian types who want to use something that isn't controlled by a government

- HFTs and speculators who either use it in part of their models or as a pump and dump vehicle

Some people also use it to buy illegal stuff, but most of them have moved onto Monero as the primary privacy-based cryptocurrency.

> Crypto enthusiasts who are infatuated with the technology or the math involved

I agree that it attracts these people, but I can't figure out how they make the leap from "clever math" to "this has monetary value and I want in."

So where do online drug dealers fit in the first 2 options?

Or Saudi / Chinese / Russian business types that are trying to extract wealth and avoid the blowback of a regime change?

They probably fit under #2 but I certainly wouldn't call a lot of those libertarian in ideology or even in practice, just opportunists.

Exactly, like a currency on the gold standard. But not an asset like gold.

It's nothing like the gold standard. What made the gold standard a bad idea does not apply to Bitcoin.

You mean that there is a cap on the supply that cannot keep pace with the growth of the real economy?

The cap is irrelevant. Instead of printing more the value per unit goes up in the end it does the same it adjust for growth just fine. It's just not practical for a fiat currency to change it's value depending on the economy situation. If for example the USD would have a fix cap and its value would swing with the economy, people would speculate with it. At peaks everyone would want to buy and at the lows everyone would pay salaries and debs etc. the growth isn't the problem the swings and uncertainty about the value makes it unusable for a currency. Bitcoin doesn't have this problem is kinda like gold no one really want to pay with it (beside the bitcoin maxis).

You sound like you know nothing about how currencies actually work. Both exchange rate and purchasing power of the USD do change over time. People do speculate with currencies. And the cap is absolutely not irrelevant if you were to have a global Bitcoin economy. The US would not be able to set the prices on its own, and those would instead be determined by the global market forces. This means the country loses and and all ability to do monetary policy.

No one care what you think I know or don't know bring arguments that support your opinion.

Whats the mcap of USD? Whats the mcap of EUR? Whats the mcap of Gold? Why does no one know exactly? Because It's irrelevant meaningless and basically impossible to know because of lost units and secret holdings (in case of gold)

Ofc people speculate with currencies but not the average joe, whos supposed to use it as a medium of exchange. And that's the whole point. Small fluctuations or small inflation doesn't matter for its use as medium of exchange.

The whole "global bitcoin economy" thing wasm't the topic of my post no clue why you tell me this. Also the price of btc is already determined by "global market force" if you wanna call it that way. although it has not much to do with any other market. It's just supply and demand that make the price.

>> Whats the mcap of USD?

Start here https://fred.stlouisfed.org/graph/?id=CURRSL,

and here

https://fredblog.stlouisfed.org/2014/09/how-much-money-is-th...

The currency component of USD doubles every 10 years.

I didn't ask for the mcap of USD. It was a rhetoric question. Ofc you can find numbers and statistics about it. But they are obviously not correct as stated above they do not include any lost money. Also the value is meaningless. Not a single person on this planet does any educated decision based on that value. It's completely irrelevant. And that was my whole point.

If you trade fiat/precious metal or similar assets no chart will ever show the mcap of said asset. But somehow bitcoin and crypto included that value. The only obvious reason that this is a thing, seems to be because crypto space was created by people who have no clue about "money" or how irrelevant the mcap is for these assets.

Read again "The currency component of USD doubles every 10 years."

Therefore,

"they do not include any lost money"

is irrelevant unless you believe people lose about half of their money over a single decade

"Not a single person on this planet does any educated decision based on that value. It's completely irrelevant. And that was my whole point."

That is false. Smartest people do take into account the fact that the market cap of USD doubles every decade. Printed money have to go somewhere, they do go in US stocks with the smallest loss on the way. Therefore, US stocks also double every decade. Therefore, it does not make sense to search for investments which deliver less than 8% a year since you are basically losing money relatively to the actual total amount.

>> If you trade fiat/precious metal or similar assets no chart will ever show the mcap of said asset.

Seems like you never traded in your life. First, look at Interactive Brokers, the most popular retail platform. For any stock you click, you see its market cap. Investor do invest differently depending on whether it is large cap or low cap. Google it, learn something. Even Yahoo Finance shows market cap.

You basically have no clue what you are talking about. Not need to reply, you are wasting my time. Cheers.

You can not see that the mcap doubles in 10 years if you check the current mcap. You just explained why the mcap is pointless. Everyone know USD gets printed. Inflation isn't a secret either. No one need to check the mcap daily over several years to see that. People may wanna know the inflation rate in % per year or how much money was printed in the last year etc. The current mcap however says nothing. The history may show a trend but that's something completely different and the actual current value isn't relevant do determine a trend.

Also you totally bullshitting neither Interactive Brokers nor Yahoo Finance shows mcap for any fiat or precious metals. It however show mcap for cryto (Yahoo) but that doesn't make it a useful value. Its most probably just copied form CoinMarketCap.

>For any stock you click, you see its market cap.

Sure, but I said fiat/gold not stocks. The whole discussion started because people think the mcap of bitcoin somehow makes bitcoin or other cryptos comparable to stocks or fiat/gold. But that's nonsense because the value itself has no meaning for these assets.

Again, no none care that you think I have no clue. Bring arguments/sources for your claims or stop wasting everyone's time.

Yes, it has morphed. The devs in charge of Bitcoin have purposely abandoned the idea of it being a currency. On-chain transactions are artificially limited to about four per second, and they refuse to change that. They call it a "store of value" now.

Other cryptocurrencies are working hard on scaling to the point of being workable currencies.

> The devs in charge of Bitcoin have purposely abandoned the idea of it being a currency. On-chain transactions are artificially limited to about four per second, and they refuse to change that. They call it a "store of value" now.

I don't think they abandoned the idea of it being a currency, I think they just have different ideas about how exactly to go about scaling it. The block size limit (and therefore the transactions per second limit) was raised 2x rather than significantly more because they don't think scaling onchain is a viable long term solution [0].

Lightning, and other second layer networks have always been discussed as the solution to this scaling problem, and while they are still very early, there's already a fair amount of usage. I work at a company that accepts Bitcoin, and as of today, > 90% of our transaction volume is via lightning.

[0] https://en.bitcoin.it/wiki/Block_size_limit_controversy#Argu...

is your company hiring? I am a backend java developer who is looking for opportunities in bitcoin world.

It's more complex than that. It's the miners, not the devs, on the Bitcoin network refuse to come to a consensus on what Bitcoin should be. It's like a weird 21st-century internet tragedy of the commons.

This is why I think "decentralization" will never work. It's just a power vacuum, that will be filled/abused one way or the other.

Precisely. It turns out that despite some of it's flaws, having your currency managed by a central organization that is incentivized for stability tends to work better than a handful of data miners stealing electricity in China.

And whoever owns the domain https://bitcoin.org.

> Because Bitcoin is (at least theoretically) a currency.

Bitcoin is many things, but pinning it as a currency is very reductionist.

It can be used as a currency, but in its current form, it isn't very practical (lighting is aiming to, and will likely succeed in fixing that).

It is IMOH very much more useful for all the other use cases (eg store of value, doing away with government brain-hared management of fiat currencies, etc ...)

If they didn't want to be a currency they likely should have not used terms like Wallet and have their landing page say "Bitcoin is an innovative payment network and a new kind of money."

BTC has always had more in common with rare gemstones like Taaffeite than currencies or even metals.

No practical value, no industrial value, no means to materially change the rate of production, nothing special at all except that it is rare, only a few people care about it, and its price will always depend primarily on the behavior of a very small number of market participants.

You can google any ticker symbol and find the volume relative to the outstanding shares.

> How much gold that exists is actively traded?

A better analogy would be: how much gold is actually being physically moved from one vault to another.

100s of billions of dollars of gold is traded each day.

Is it actually gold that's being traded, or papers/promises/options/whatever-else-but-physical-gold saying 'x amount of gold' is actually traded?

Well, physical Bitcoins aren't being traded either.

Because there aren't physical Bitcoins.

Actual custody is being traded though.

Same for gold (again legally, not physically).

For gold, typically ownership is traded, not custody.

That could be the same gold being traded multiple times per day. What % of all gold extracted from the ground is traded annually?

Why does it matter if it's the same gold?

Say a 100 people each own a 100 gold pieces. And they all buy and sell 100 gold pieces worth of goods and services per day.(10,000 gold pieces are traded) Why would it matter if this is physically the same gold coin traded 10,000 times or 10,000 gold coins being traded once?

Because the WSJ article specifically talks about the number of bitcoins traded as a percentage of the whole number of coins mined. This is why I keep asking for this percentage for other assets like gold and stocks.

On options maybe.