[eloff]

I don't think fiat currency has terribly much more going for it, in terms of intrinsic value, other than you do need it day to day because there aren't alternatives for buying things and paying your taxes.

If here in Canada the US dollar became legal tender and I could use it for all my transactions, would the Canadian dollar hold its value? I don't think so.

[nabla9]

Liquidity matters. Cash is king because it's the most liquid asset. You can sell $100s million dollars worth USD/EUR/JPY/GBP in a day without affecting the price those currencies. Bitcoin is the polar opposite of liquidity. Bitcoin markets are notoriously thin. If you try to by or sell large amounts the price either collapses or skyrockets.

Bitcoin is like water tower where you can move water level (price) up or down by adding or removing 10-20 cubic meters of water. Fiat money is like a big lake or a sea. You can take or put 100 cubic meters per second and it's not visibly moving.

Once BTC price rises to the level that enough people feel rich and start buying things, the price will drop suddenly. Panic hits the markets and the price drops like a stone.

[alwillis]

Bitcoin is the polar opposite of liquidity. Bitcoin markets are notoriously thin.

This hasn't been true for a while, especially lately, as tens of billions of dollars flows through bitcoin exchanges everyday.

[leppr]

It is still true. The latest buying by Microstrategy doubled the price (and more as more buyers piled on after the announcement), and they had to accumulate it over months.

That's how a fixed supply asset works, the price reacts to supply and demand, and sell-side liquidity dries up with expected increase in demand.

[anonymouse008]

At least the 'pretty girl' in this example can point guns when she's a fiat - so she definitely gets a few bonus points for that.

[eloff]

Does that benefit the currency of Canada at all? I don't think so.

Maybe with the US currency, but that's also special because it's currently the reserve currency of the world.

[graeme]

1. You can use dollars to pay taxes. Big difference from bitcoin

2. No one expects fiat currency to be an investment asset!

Why anyone expects the value of bitcoin to increase like stock ownership of a corporation is beyond me. And it has no intrinsic value like gold.

[eloff]

Gold doesn't have that much intrinsic value either. It's hard to obtain, but so is bitcoin. Gold has the advantage that it has some use in personal adornments - but I believe that's a marginal use. Bitcoin is easier to buy, sell, and store. I've said many times that the best description for bitcoin is electronic gold, not a currency.

[leppr]

Not all demand for an asset is tied to states. Most activity around Bitcoin is actually precisely about evading state controls.