The USD and the Euro, in comparison to BTC, are magnificently stable.

Sure USD/Eur changed in relative value by 100% over the course of 6 years after the inception of the Euro. That's very stable for a new currency, especially in contrast to bitcoin. The BTC/USD rate has changed by 400% over the past 30 days.

If it is to be adopted widely, at some point it has to go from being distributed among a few million, to being distributed among a few billion. The continual price rise will correlate with that adoption continuing to happen.

So yeah, I understand all these arguments about volatility, but the reason they don't bother me is because they don't seem to point out anything bad about bitcoin in principle, in the long-term, they only point out the negative aspects of using it as a currency while its undergoing its adoption phase. I don't think there's actually any argument that using bitcoin as a currency right now isn't going to work as well as dollars/euros.

Sentiments along the lines of: "For bitcoin to be adopted, it should be stable first" don't make sense, because adoption (demand) drives the instability. That statement is the equivalent of saying "For bitcoin to grow, it should not be growing."

That's right, and it's a feature, not a bug.

Those that do have wealth to protect should be encouraged to use it for productive investments. Mild inflation is one way to do that, and it is healthy. Massive inflation to fund overseas adventurism on the other hand, is not healthy.

As the author of this piece correctly points out, deflation leads to hording behavior. In a world where everyone used bitcoin, the wealth disparity would only grow faster.

Elasticity simply refers to whether the supply can react to price. In bitcoin's case, it cannot, since the supply is determined by an algorithm.

In fact your comparison exposes the biggest problem with Bitcoin: it's a solution in search of a problem. The USD has a long track record as the best managed currency in the world. The 70's stagflation debacle was a minor hiccup by world standards, and the current quantitative easing policy is nothing. Why would anyone in their right mind convert their dollars into Internet funny money? I mean, sure, back in 2009 when Bitcoin started, people were panicking having witnessed the Lehman collapse and TARP. But now we know the world isn't coming to an end, so why bother?

I think the issue is that you are speaking from a position of comfort from the US. Of course USD seems fine to you, the US suffers the least in all these recessions. But for people outside the US, they often see their entire life's savings vanish. In Argentina inflation is not something that is only academically talked about, it has a real effect on every day life, the government understands this (and exploits it), and thus works hard to prevent everyone from fleeing the currency. Bitcoin does offer a real new alternative in this regard. Whether it will prove to be any better is admittedly an open question, but the idea that USD is some saving grace for foreigners is naive.

P.S. Correct me if I'm wrong, but didn't Argentina go through a dollarization phase at some point?

Brief Economist coverage here: http://www.economist.com/blogs/americasview/2011/11/argentin...

There was a decade in which pesos were directly convertible to USD at 1:1 exchange. That system collapsed when the government became insolvent.

With regard to "dollarization" in Argentina - Yes, and it should serve as another counterexample to your point. During the 90s when everything was fine Argentina "backed ever peso with a dollar". At stores no one cared if you used dollars or pesos as they were 1-to-1. (Similar to how the US used to back every dollar with gold). Then when things went south they "undollarized" (once again robbing people of their money as devaluation soon followed).

And sure, a country could crack down on holders of Bitcoin too. But the point is that it is a lot harder to catch someone purchasing with bitcoin, or even holding bitcoin, than it is to catch someone with dollars in their mattress or trying to buy something in a physical black market with physical dollars. Its really hard to catch someone with bitcoin "on hand" in general.

Just out of curiousity, is it easier for Argentines to get Bitcoins than USD? I find BTC really hard to get even in the United States.

At the end of the day, when a currency becomes worthless people start trading in something else, whether that be USD or cigarettes (like in post-war Germany). The attraction of Bitcoin is that it is basically tailor made for this and additionally is accepted by people outside your country.

Only time will tell of course. My point is simply that it is not just trivially "just another currency" where all the same rules apply. That being said -- it may crash and fail for completely unrelated reasons.

If we needed to buy everything in the US but store all of our wealth in Euros, this would be the right comparison. But since we don't, "stability" means low and predictable inflation for the Euro and the dollar. The exchange rate matters for Bitcoin because wages, goods, and services are all denominated in non-Bitcoin currency. Look at inflation over the same period and you'll see that the dollar really is a "bastion of stability" (in that narrow sense, the Euro is too... but the Euro's got other problems beyond the scope of this discussion that make me reluctant to vigorously defend its stability).

Now your post appears to talk about the first point, which I agree, I only do not see how you jump to the conclusion that bitcoin is more stable than Swiss francs for example, stability is the guarantee that you'll not lose money if you trade all your wealth from one state to another, I do not see how bitcoin guarantees that (no store of value does), the only real alternative to not lose value is diversification, put your money in as many different things as you possibly could, never let a bank have more than 20% of your entire cash money, buy as many different investments as you could, precious metals, stocks, solid bonds and let them be on safes or clearing houses that's not attached to a bank.

And most important stay away from banks from countries with large public debt.

Assuming you manage your life with some other currency (USD), you would ideally want something that has reasonable value when converted to your other currency.

Bitcoins are one asset among many, and just as prone to booms and busts.

And while I don't live on the Internet, I do conduct some of my economic life on the Internet: buying, selling, consuming, and creating.

Because they have business there, so in a sense they do live there.

> And while I don't live on the Internet, I do conduct some of my economic life on the Internet: buying, selling, consuming, and creating.

Maybe that's the logic leap I have to take to use bitcoins: I don't consider that I buy things from the Internet, I use the Internet to buy things from stores. Maybe when we have a Snow-Crash-type Metaverse I'll start using virtual currencies :)

I can't wait to see the face of doomsayers once Planetary Resources (or other company) starts mining gold from asteroids. I'm sure Gold's intrinsic value will hold up, with the increased supply...

Are these movements different than a historical norm? You provide numbers with no context - it seems as if a movement of 100% in 6 years is meant to be shocking because 100% is a big number.