Re:Warren Buffett: Stay Away From Bitcoin. It's A Mirage
by mcguire on Friday March 14, 2014 @02:36PM
(#7400865)
As an investment, Bitcoin isn't. It's no more an investment than storing rolls of quarters under your mattress. A Bitcoin in your wallet today is a bitcoin in your wallet tomorrow. An investment today is, at least potentially, an enterprise or a service or a product tomorrow.
Bitcoin as a medium of exchange is more interesting, since it in many ways behaves as cash while still being digital. It doesn't have some of the downsides of credit, which is the only other convenient digital medium of exchange.
On the other hand, as it stands, Bitcoin is not a very good medium of exchange, for the precise reasons that many people want to mistake it for an investment. It's too volatile, there is too much speculation; exposing your transactions to that kind of currency risk without really understanding what you're about is insane.
Further, the deflationary behavior of Bitcoin ruins it as a medium of exchange in precisely the same way that feature makes it appealing as an "investment". A Bitcoin that will buy you a cup of coffee today might buy you a yacht next week; as soon as you realize that you have significantly less incentive to spend it on the coffee. Meaning that there is a disincentive to use it as a medium of exchange today and that same incentive will be there tomorrow, too.
Bitcoin as a medium of exchange is more interesting, since it in many ways behaves as cash while still being digital. It doesn't have some of the downsides of credit, which is the only other convenient digital medium of exchange.
On the other hand, as it stands, Bitcoin is not a very good medium of exchange, for the precise reasons that many people want to mistake it for an investment. It's too volatile, there is too much speculation; exposing your transactions to that kind of currency risk without really understanding what you're about is insane.
Further, the deflationary behavior of Bitcoin ruins it as a medium of exchange in precisely the same way that feature makes it appealing as an "investment". A Bitcoin that will buy you a cup of coffee today might buy you a yacht next week; as soon as you realize that you have significantly less incentive to spend it on the coffee. Meaning that there is a disincentive to use it as a medium of exchange today and that same incentive will be there tomorrow, too.