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by zcarter
4580 days ago
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The 'depreciating currency is a problem' argument is true for the existence of any asset having a higher yield than your widget factory. Why wouldn't you invest in that high yield asset instead of your widget factory? In this way, you can view _any_ appreciating asset as a reference unit of account. It is just as easy to see your egg and milk purchases as units of the high yield asset and delay your purchases for the same reason outlined in the article. So, it's a nonsense argument. If you have a strong prior that stocks are going to be worth 100% more tomorrow than they are today, why would you buy milk and eggs with your spacebux today? You could invest your spacebux in stocks, sell them tomorrow, and buy milk and eggs tomorrow! Therefore, no one will buy milk and eggs today if stocks are expected to rise in price. |
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If you think of or use Bitcoin as an asset, you immediately nullify any comparisons with currencies because the two serve different purposes. You could, in principle, buy a house with, say, 10 cars. But that is not done in practice because the market for asset-to-asset transactions (bartering) is small and illiquid.
If you are willing to ignore Bitcoin's purpose as a currency and only use it as an asset, you need to consider what will drive its value in the long term. For most things, that value is just a function of the supply and the demand. While the supply of Bitcoins is fixed and the demand for items that can be bought in BTC is increasing, what will happen when everyone realizes that BTC is a better asset than currency and stops using it for transactions? It will become illiquid, and illiquid assets only have their tangible value. Since Bitcoin isn't tangible like a house or a car, its tangible value is zero.
For the record, I think Bitcoin has potential, but not with the present economic dynamics.