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by hilko
4813 days ago
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Very well put. I think past experiences are definitely reason to be cautious, but too often it seems that analysis neglects to even consider the fact that there is no direct equivalent to Bitcoin. It remains to be seen if Bitcoin is 'worth' its current valuation, but I think it's obvious that it has and will continue to have uses in the future. |
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I believe that Bitcoin's value is more of a speculative digital asset rather than a currency because, there are two reasons to own Bitcoin - either to derive indirect utility through purchasing goods with Bitcoin in the future OR the expectation that Bitcoin will rise in monetary value. Currently, Bitcoin can be considered elastic (to some extent) although it’s subject to future diminishing elasticity meaning that, in the long run there will be a finite supply of Bitcoins and an inelastic supply (after all there are only 21M of them).
However, a long-run inelastic and fixed supply currency is not useful for a real world economy because, currencies are supposed to be used as a medium of exchange to facilitate transactions which, allows the multiplier effect kick in and increase the economies wealth. Whereas due to the deflationary spiral you're incentivised to hoard Bitcoins & let them appreciate in value instead which is the opposite effect of what a currency is meant to do.