I fail to see how something with wildly fluctuating value like bitcoin can ever serve as a stable currency or medium of exchange.
Maybe it's a "less terrible" solution in poor countries with inflation challenges, but I don't see that as a strong proposition for the utility of bitcoin. Cigarettes are used as a medium of exchange in prison. That doesn't serve as a strong argument for using cigarettes as currency.
Volatility is only problematic to the downside, not the upside. Bitcoin's volatility is skewed to the upside. Yes if you were not advised properly, and buy the top, you may be down, but only temporarily.
There are long phases in BTC's history where 100% of holders are in very handsome profits. And that's the problem?
No, it's also problematic to the upside if you're trying to use it as currency or medium of exchange rather than a speculative investment. How do sellers of assets price things? If I'm trying to sell a home in bitcoin and btc surges in value one day, do I lower my price accordingly? Or do I wait to see if btc goes back down a bit and settles? Volatility - both up and down - is destructive to price discovery.
If you're just making long speculative investments in btc and volatility is skewed to the upside, well sure that's fine but you're not using bitcoin as a medium of exchange, you're investing in it as a security.
Ironically, the number of people who use Bitcoin directly (that is, on the blockchain with their own address) is significantly smaller.
Most people use Bitcoin via exchanges, where they keep the coins. The average crypto user from Nigeria has zero interest in paying $10+ transaction fees every time they need to do anything with their money.
At this point, it doesn't matter if they own BTC or ETH or DOGE or whatever. They just want whatever allows them to move money around. The exchanges could simply keep balances in a database and reconcile them amongst each other via contracts, and it wouldn't make any difference as far as the end users are concerned (There are examples of this happening between exchanges).
I see this being thrown about as a talking point a lot, but I think it ignores what's fundamentally happening here.
Bitcoin is essentially a proxy for another currency. Mostly the USD. These people need a way to protect their assets from what their own governments are doing to the value of their native currencies.
They cannot buy securities or foreign currencies for various reasons.
Bitcoin gives them a way. A way to convert their native currencies into USD, a stronger currency.
So while it's a good use-case for Bitcoin, it's not exactly a situation that's applicable to the world at large.
> Bitcoin is essentially a proxy for another currency.
Yes, but this is only temporarily. It's like refactoring systems. You create a new system and a proxy and then have the old system communicate with the new one via the proxy (or vice versa). Eventually, the old system becomes obsolete, so you kill it and get rid of the proxy.
But if your proxy takes at least $10 of your currency every time you use it, you would expect people to look for a different proxy.
In your example, Bitcoin would obviously be the "old system" if everyone wanted to use it for moving money around, because there are plenty of more advanced alternatives that work far better.
So why is Bitcoin so popular? Because it's a speculative investment. A new asset class divorced from fundamentals, making it impossible to say when the value is too high. That's why people like it.
Maybe it's a "less terrible" solution in poor countries with inflation challenges, but I don't see that as a strong proposition for the utility of bitcoin. Cigarettes are used as a medium of exchange in prison. That doesn't serve as a strong argument for using cigarettes as currency.