Because you can buy beer for dollars, so if your local beer costs 50$ in BTC it makes sense to sell BTC for USD and order beer. And if your beer suddenly costs 0.001$ in BTC it makes sense to sell it off to someone in USD and refuse selling in BTC.
> It is worth the same number of bitcoins yesterday, today, and tomorrow. That's the only stability that is relevant.
This is the most idiotic argument ever, if this was true it would be irrelevant if a currency depreciates/appreciates.
So then why feel bad about trading some BTC for it? The regret would be for not buying back.
It also requires the goods and services you buy to be traded in dollars. If stores buy food, gas, etc. wholesale in dollars, for example, and sells it to you for bitcoin, there's going to be a problem.
Making it a legal currency won't even force anyone to accept it. As far as I understand, it will simply mean that the government will accept payments in BTC.
The telling thing would be what the gov't pays in (e.g., for tax returns). Do they pay you back in BTC? or fiat?
Given the massive volatility of BTC it presents a massive opportunity for arbitrage that mostly has downsides for consumers who want stable supplies of goods.
That would be nice but it goes against the "number go up" theory of "bitcoin investing".
Is it worse to peg your economy to a decentralized cryptocurrency, or a fiat currency controlled by a large powerful near-neighbor who only occasionally even remembers you exist? (and sure as hell will not modify their fiscal policy with the needs of your economy).
Having a backup official decentralized currency doesn't seem ridiculous to me. Maybe I'd use Eth or something that can scale better, but the point is the same.
A currency needs stability. Speculation needs volatility.
Speculation only works when there's a stable currency to dump your value into when the the security your trading is going in the wrong direction.
The word “currency” is inherently a tautology. How does something become a currency?
> Speculation only works when there's a stable currency to dump your value into when the the security is going in the wrong direction.
Precious metals long predate government monies. Gold and silver couldn’t have become currency under the definition you’ve presented here.
gold and silver were bad currencies back then, when people had no real alternative. People clipped coins, and debase the currency. People horded them when times were tough, and prevented lending and circulation, causing issues with the economy regarding liquidity.
Have a read of https://en.wikipedia.org/wiki/John_Law_(economist)#Economic_... and educate yourself about the past.
Hence the rise of algorithmic stable coins.That's highly debatable. I'll grant you, it's advertised to be.
No. Your argument is "Yeah, we know it's terrible... so you can't hold it against us." Nevermind the fact that coinbase started to support Tether.
I think what's most interesting to me (and should be to you as a pro-crypto advocate) is that underlying backing in tether appears to be highly volatile, yet it's not represented in the price. Also what should be shocking is hodlers don't care about this either.
Nobody cared about Bernie Madoff as long as their accounts and the market kept going up. As soon as people tried to take their money out, however....
I wouldn't call me a pro-crypto advocate, just as I wouldn't call you an anti-crypto advocate. I like to keep track of what's happening in the crypto space but I'm not advocating pro or against it.
My opinion on Tether is that there should be a lot more transparency regarding their backed funds and personally I wouldn't touch it with a ten foot pole.
Because you quickly resorted to ad hominem attacks even though you failed to provide any alternative or even a single counter example.
It does not seem you're able to point out anything at all.
Is that because you are aware that there is actually no good argument to refute OP's point? And thus you resorted to name-calling?
The US is El Salvador's largest trading partner - so Bitcoin's price relative to the USD does matter.
100% on bitcoin means no services, no goods, an economy where nothing but bitcoin exists. As soon as I need to drink water the price of water and the income of the operator of the well will go down over time because of the fixed supply and the hoarding of currency.
If you wanted to add more things to your list, try "the majority of people buy it because they hope someone else will buy it for more in the future."
And Usd isn't doing too well in the last 2 years.
Obviously too much of any good thing is bad, and this applies to inflation as well. But the idea that you’re supposed to hold fiat for long periods of time is absurd and I’m tired of Bitcoin maxis who don’t actually understand money or economics parroting that line.
You’re not supposed to hold fiat. You do something productive: you consume with it, you invest in productive assets, or your lend it (to someone who will do one of the two former actions).
Bitcoin doesn’t compete with fiat. It competes with every other investment asset.
I looked up hyperinflation in MMOs and honestly the hyperinflation is by design. The fundamental problem is that veterans should not prevent new players from earning money. If the supply was fixed then veterans would acquire the majority of the currency. By letting monsters and NPC vendors print money you are stealing from the rich players robin hood style. It's impossible to solve without just outright taking the money that NPCs printed from wealthy players.
I've seen other approaches that just try to limit the supply of ingame currency and tie it to some random cryptocurrency or just plain old dollars and that is such an overengineered solution that doesn't even address the robin hood problem, which isn't a bug, stealing wealth from old players is 100% intentional.
There's a huge cost in "stabilizing" a fiat currency, in terms of debt and inflation.
https://mises.org/library/hayek-paradox-saving
Hayek was later interviewed in the 70s and said he was mystified when Keynes was promoted to godhood upon his death. He claimed the debate had not yet finished.
[1] https://en.wikipedia.org/wiki/The_Denationalization_of_Money
We are not talking about deflationary money either. We are talking about stable money supply, which is what Bitcoin is.
Sure, the article never mentioned anything about deflationary currency, but you were responding to a comment that a deflationary currency would have issues that you seemed to respond in opposition to. If you don't have a stance on deflationary currency, what is your argument for or against?
On that note, I believe that bitcoin fits the definition of a deflationary currency, and having looked up 'stable' money supply haven't found a consensus on what that means. Could you explain how you define that?
Simple, because the investment would return more than the natural rate of deflation alone would.
Stable sources of growth have existed for decades but somehow most investors aren't just going all in on those. That's because investors care more about good risk-adjusted returns than lame guaranteed returns.
>Investments would have to have very high upside to be worth a stable but lower rate of deflation.
Investments with risk-adjusted nominal returns above 0% are worth it if the currency is deflationary: even if the investment only has a nominal 1%/year return and the currency deflates at 2%/year, that's a 3%/year real return. So it's still better than just holding the currency, even though the nominal return is lower than the deflation rate.
> Secondly, I'm not sure how you can be certain that investment returns, without regard for risks, could be higher than the deflation rate.
Returns on most investments aren't certain in an inflationary environment either, so I'm not sure what's your point.
This leads to your first 2 points, where people might still want to invest to get a potential higher return than the base deflation rate, investments would drop compared to an inflationary environment. In the inflationary environment investments are necessary to prevent the loss of value, whereas it isn't in a deflationary one.
There is a group that hijacked the name for their own prize, whom the Nobel committee has no contact with. They are, of course, economists, so any merit in their prize is only as much as economists' at large.
The which is, let us say, disputed.
Bitcoin is not guaranteed to be deflationary. It's deflationary when the economy is growing. It's inflationary when the economy is shrinking. Deflation will slow down economy, and inflation will accelerate economy. It's a stable self-correcting system, which would correct itself to match the average economic growth globally.
More importantly, the people hawking it _really_ want it to be deflationary because that effectively makes them landed gentry getting richer without any effort on their part. After a decade of that being integral to the sales pitch I would be extremely surprised to see any major holder support breaking the deflationary model.
This has been a key part of the sales pitch for a decade: buy now and it’ll be worth more later, guaranteed, but that’s not good for an economy since it heavily incentivizes holding onto anything you aren’t forced to spend. Since Bitcoin has no innate demand, that’s an especially dangerous cycle since almost everyone has alternatives.
No, it doesn't. Bitcoin can lose 50% of its value in a matter of hours, as recent experience shows, despite being in a limited supply.
As a global reserve currency, bitcoin would act as an "index fund of everything". Economy is expected to grow, but it's not guaranteed. Which means that there's always a non-zero risk associated to it. There's more risk on short time scales, and less risk on long time scales.
So because the number of bitcoin is fixed to remain relevant bitcoin will need to continually deflate (ie increase in value) so that there's enough to represent the size of the economy
Yeah it is basically people getting screwed by increased wealth inequality and then as a response they don't think of a way to build a system without losers, instead they join a system where the old dynamic makes them the winners. The only difference is that you start from a clean slate from 2008 onwards.
Which system is that?
We’d need to assess the merit of anarcho-capitalism vs collectivist democracy to understand whether disempowering governments would in fact decrease economic stability.
If one were to completely oversimplify everything the roman empire fell into the "war + debasement" bucket though but it also had a lot of other problems. They were actively fighting a war which meant they couldn't control the influx of barbarian refugees (huns drove them out) at their border. They then committed a grave mistake. They deported all barbarians and killed those who stayed. Some barbarians gathered near the border and formed a big army which then proceeded to plunder Rome. The problems didn't start with money, they got worse because of money.
So, it results in destabilizing governments that are overspending, but stabilizing those that are not.
How many times does this get repeated? No money is being printed right now. No MMT is happening. No helicopter money is happening. Barely any Keynesian fiscal stimulus is happening (the US has stimulus checks but the EU doesn't and it's suffering for it) and the fiscal stimulus that is happening is financed via debt. No money is being printed right now.
The majority of money that the Fed creates is primarily issued via debt. The part that isn't is used to buy assets that are being put on a balance sheet and the sale of the assets will often remove more money from the economy than it added. QE does nothing but fill bank reserves so that banks lend out more money.
"Financed with debt" that is never going to be paid back. You have to think who is doing the actual financing here, and why they aren't getting interest on their financing.
Citizens of Turkey, Lebanon, Nigeria, Ethiopia, Zimbabwe, Argentina, Venezuela, Iran, Belarus, for example, all have their savings being stolen through inflation to greater or lesser extents.
The Zimbabweans that lost all of their savings to hyperinflation were literally counting the days until Mugabe's government collapsed.