I mean I don't think anyone can deny that it turned out to be great to speculate on so far, but is it actually a good means of exchange or store of value? It remains extremely volatile.
In many situations it is an excellent means of exchange of value. Convert your fiat to bitcoin, make a global bitcoin transaction (for a comparatively small transaction fee, and within 30 minutes), then convert the bitcoin to fiat on the other end.
That's WAY better than a bank wire, and even better than the increasingly effective service that Transferwise provides. It's also beneficial to at least one party because no bank can reverse the transaction.
It's relatively inefficient and it's hard to see why someone would choose that over wire transfer unless they were doing something illegal. I also don't get why "no banks can reverse the transaction" is touted as a benefit so often; what sane buyer prefers to do online purchases where they have no recourse if they never receive the goods?
Most of these types of uninformed, regurgitated, bait-articles typically are, because that's what makes them so effective. They don't want you there admiring the technical or journalistic merits of the article, they want you to link it because it is so outrageous, "look how absurd this is, just click it and LOOK!"
Gresham's law is specifically about the case where people are required to treat the two moneys as equal when one has a higher real value; if they're just different goods with no parity requirement, the effect doesn't happen.
(People casually refer to "bad money driving out good" whenever smart investors abandon bad markets, but that's a different dynamic from Gresham's Law proper.)
What you are referring to as 'good money' , most people would call 'stupid money'.
It's a stupid idea to run a country with a fixed amount of currency - as the economy expands, more currency is needed - either that - or all prices of everything need to adjust because the 'stupid currency' is fixed.
A 'well managed' currency is better than a fixed supply.
Of course - the 'existential risk' is that some political cowboy will 'print money' for political reasons - this is the great problem that fiat always faces.
But this can be avoided.
Most major currencies are very well managed.
Also - remember that they are backed by actual assets - so money is not coming out of nowhere.
Almost all Euros are backed by some kind of quality asset. It's very rational to allow entities to 'trade' some kind of asset for currency at the central bank. This is actually more 'free market' than any kind of fixed currency.
National currencies - irrespective of the quality of their governance, fixed or not - are extremely useful to everyone. They 'spend' that currency because it's what's used to buy stuff.
Household expenditures: mortgage/rent, electricity, groceries, insurance, gas, car payments, cable/internet. Can you use BTC for any of that. Pragmatically - No. BTC is 'pragmatically worthless' to anyone - it has no reason to exist.
BTC is very useful to money launderers, tax evaders, and other people doing illicit things, it's a great currency for the black market. But beyond that, it serves no purpose. It's not a currency and it's a terrible store of value as compared to any of real-estate, gold, most commodities, a 'basked of bonds of equities' or a 'basket of currencies'.
It's a great intellectual exercise, and I think the 'paper value' of BTC will remain quite high for some time, but unless it sinks in as an actual currency of some economy (say, African nations where the currency is garbage), in the long-long-long run there's no reason for it to maintain it's value.
When will the bitcoin haters finally realize that bitcoin is terrible for illicit transactions. The transactions is recorded forever...on a public ledger...and any money in or out of your address is traceable
Most interesting aspect to me is the deflationary aspect. Savers in today's society get punished. If you don't want to buy lot's of stuff and instead want to achieve financial freedom, then Bitcoin can be a viable alternative.
Additionally I work abroad, once I realized how much is was going to cost me to send my salary back home using the traditional banking system, I quickly became a bitcoin enthusiast
A deflationary currency seems pretty terrible for business operations or for any major purchases (car, house, etc.) though. If it's just an asset to hold on to that's less of a concern but the volatility of Bitcoin would make me nervous.
IDK I've gotten paid in bitcoin, and a variety of other alts before. Sometimes I moved into fiat, sometimes I saved it, if it can buy labor, it should be able to buy basically anything.
In fact I wish a portion of my actual salary was in Bitcoin, so I didn't have to pay exchange fees every month lol
If you're considering a long horizon, then volatility shouldn't bother you too much.
I know... every time I hear/read that it raises a red flag that maybe this person hasn't done much reading on the subject to begin with and just heard it through the luddite grapevine.
Because it's a currency that works like cash over the internet with no reversibility, it can be easily laundered via mixers, and has no ties to your real life identity unless you want it to.
It's not perfect but it's by far the best currency for illicit online transactions.
When you use a coin tumbler, the image invoked is that of laundering like clothes tumbling in a washer machine. How can willingly jumping into an optional laundering service not raise a red flag? Is it possible that another cryptocurrency like Monero will have privacy as a default that makes it so you don't look like Al Capone when you [maybe] want to just preserve some privacy?
1. User A holds a publicly visible wallet with 1000 bitcoins in it.
2. User B publicly gives User A 10 bitcoins.
3. User A now holds a publicly visible wallet with 1,010 bitcoins in it.
4. Over the course of a month, User A distributes all 1,010 bitcoins across a thousand new publicly visible wallets, in seemingly random amounts. These wallets are publicly visible, and the transactions are publicly visible.
5. Nobody knows who holds the keys to any of those wallets. Presumably, at least 10 bitcoins worth of money belonging to User B is held in some combination of those wallets, but figuring out which ones belong to User A vs User B suddenly becomes very complicated.
6. This becomes even more complicated if there are more than two users in the scenario. What if there are actually a thousand users that the money is being mixed between?
This is the premise of bitcoin mixer services. It is at least somewhat possible to "anonymize" and "launder" public bitcoin transactions on the public ledger via this method. This is especially true if someone uses multiple mixer services to launder the same money split across a bunch of wallets.
Or at least that's my understanding? I've never actually done it.
Actually most money out there is not backed by any assets at all, it’s all paper money, and yes it’s managed but it only has value because of communal faith. Same as bitcoin.
Euros are backed by specific classes of assets, and USD is backed by US government debt, and since 2008 a lot of real estate (which was under water for a long time, but coming above water over time).
The US does not just 'print money' and inject it into the economy.
The Fed takes US Gov debt out of the market at market prices, and replaces them with USD of the same value - or the reverse of that.
At least at the 'central bank' level.
Now - when it comes to the notion of 'fractional reserve banking' - that's another issue entirely.
You're misrepresenting money creation. It's not arbitrary.
The government is trading money they create, for some type of asset - in the case of QE, it could be government bonds, or other things. i.e. taking bonds 'off the market' and putting currency 'on the market'. Some day it will will reverse.
Ergo - that currency is 'backed by' an asset, i.e. government bonds, or other securities.
Obviously they have to 'create it' somehow in order for it to exist, but it's only created in exchange for assets, which are held by the central bank.
'Money printing' or 'arbitrary money creation' is when governments/central banks create money out of thin air for whatever purpose.
When a government 'prints money' to pay of debt to some other country - that's just 'printing money out of thin air' - the newly minted currency is not 'backed' by anything. This will cause hyperinflation as the value of each 'dollar' is backed by less and less, worth less and less, i.e. failure.
At some point, the Fed will release those QE assets back into the market, and take dollars out of circulation - i.e. it's monetary policy, not just printing willy nilly.
What's the difference between directly printing money out of thin air and creating bonds out of thin air and selling it for money (that also was printed or electronic)?
There is a huge class of money that is created when a bank issues an covered bond (backed by real estate), which is bought by a central bank.
The money is both created from thin air and at the same time connected to the underlying assets in the bond.
I'm leaning towards the opinion that it's more "air" than "matter" in that case, but you could argue that it's somehow reflecting the underlying economy somehow.
"What's the difference between directly printing money out of thin air and creating bonds out of thin air and selling it for money (that also was printed or electronic)?"
A BOND IS A LOAN, A LEGAL OBLIGATION TO REPAY
With 100's of years of financial regulation and legal apparatus and precedence, long-standing laws, process and practices it.
It's a fundamental part of the credit system.
The price of the bond on the the markets will be a function of the coupon rate, and the 'risk' associated with the issuer actually paying back.
That's why bonds can be resold because they are worth something.
PRINTING MONEY AND SPENDING IT ON MANSIONS (or whatever) IS DILUTION
It's just making 'z dollars in circulation' no 'z*n dollars in circulation' backed by the same amount of assets, ergo, each dollar worth less.
I recommend "Investopedia.com" where you can go and look up what a 'bond' is, what a 'stock' is, what 'currency' is, and what 'central banks' do, it's a great resource.
There is still typically dilution when the central banks buys bonds, only that it's indirect - coming from the increased (overheated?) market value of the mansion(s) used as collateral for the bond.
It's definitely increasing the money supply in that case. If the assets are valuated at the correct price is another issue...
Every fiat currency that I'm aware of has some associated government that requires taxes to be paid to it in that currency, so it is essentially backed by every asset that government has taxation authority over.
Want to own real estate? Then you also need to acquire some currency to pay your property tax bill.
Want to buy food to eat? Even if you pay for the food with some other form of payment, you still need some of the local currency to pay the sales tax on that food.
Want to get compensated for your labor? Even if you want your compensation to be in some other form, you still need some of the local currency so that you can pay your income tax bill.
Want to hire someone to do something? Even if they accept some other form of payment, you still need some of the local currency to pay their payroll tax.
That creates a guaranteed base level of demand for the currency that will never go away, so the currency will always be worth something unless the government collapses or prints too much money.
>It's a stupid idea to run a country with a fixed amount of currency - as the economy expands, more currency is needed - either that - or all prices of everything need to adjust because the 'stupid currency' is fixed.
All prices are already being adjusted all the time - what is the problem?
To be more specific - the lack of monetary policy.
Greece and Spain right now do not have their own currency. Their monetary policy is dictated by greater powers - like Germany. The Euro is a 'strong currency' - it's the only way a currency union can work. There are very strict rules for how money is created.
When an economy crashes or sinks, sometimes governments want to print some easy money to 'stimulate' the economy, and a weaker currency will help exports.
Also - one 'price' that will not change easily is wages. Powerful, government sector unions will never accept a pay cut. Neither will private citizens really.
But in reality - 'the nations workers' simply are not as productive - and 'everyone needs to take a pay cut'. Not gonna happen.
Instead of 'pay cuts' companies and govs just 'hire less' hurting the economy even more.
Welcome 'monetary policy'. It's a tricky game, but they can inflate away debt, and push wages down a little bit, vis-a-vis other nations - to reflect the new condition of the economy.
Also - war, and existential shock. Monetary policy tools are important then for nations to survive sometimes.
It's a risky thing, and prone to mismanagement and certainly when politicians get their grubby hands on the Central Bank - it usually runs amok. This is the 'historical' reason a lot of people like 'Gold standards' and 'hard money' - because some tin-pot dictator can't dilute their cash.
But intelligently managed currency has elasticity - which helps smooth over bumps.
So you seem to make some really valuable points about how money is not just printed out of thin air, and is actually backed by bonds etc.
However I think what you need to understand with Bitcoin is that it isn't a finished product or in its final state. That is one of its strengths.
People are constantly working to improve it. It is literally always under development by the community that uses it. Eventually improvements will be made to improve transaction times, transaction anonymity, efficiency etc...
But even without those improvements Bitcoin is being adopted quite seriously by some significant institutions as a means of facilitating transactions. One of the largest retailers in South Africa (where I happen to live), is experimenting with accepting Bitcoin at the till.
So I suppose I am not here to preach the gospel that Bitcoin is the future and is perfect, but I would be careful of declaring absolutes like 'unless it sinks in as an actual currency of some economy ... there's no reason for it to maintain it's value.'
Mainly because most people that make those predictions (re. Bitcoin) have had to eat their own words.
Nothing prevents the seller to automatically change the price to what is the real value of the product. Bitcoin exists electronically, prices can also exist electronically.
Yes, before the internet and computers, changing the price of a product is a huge overhead. Today, it doesn't necessarily have to be.
The ultimate value of a currency is: people with military control of an area require taxes and will accept taxes in their currency. It is legitimised by force. Everything else flows from this. If a major government starts accepting your tax bill in BTC then it is real, and not before.
I wonder if Bitcoin is the perfect currency for the globalized world. I need currency to pay taxes to the state I currently live in, but if I'm a global citizen, not planning to be a permanent residence of any specific country, then doing my banking in a currency that can be easily moved, and can't be seized, is very valuable. Is the Fiat alternative keeping CHF in a Swiss bank account?
You have a lot of opinions about Bitcoin, but no understanding of how it works. It's deflationary by nature, meaning that it doesn't behave like a fixed amount of printed currency. The value of it is backed by tangible work. And it's not anonymous.
I wouldn't say bitcoin holds its value. It is a hot potato, and in my opinion the most rational thing is to trade them immediately away (for other currency, darknet goods) once you hold bitcoin.
Sure, the price has been going up like crazy, and you might hold on to them to go "to the moon". But if it crashes, the value can go to zero - bitcoin has no "intrinsic value" unlike gold, its value is only defined by what you can get for it. In that sense, yes, it definitely has a non-zero value now. But it might crash, be outlawed, etc. tomorrow and you can loose everything.
(Another point is that "value" is notoriously ill-defined. Price? Trade value? Use value? Something else?)
Good points about bitcoin, but really that holds true of everything. I don't understand why gold always gets a pass here, everyone assumes it has some magic intrinsic value. But the same rule applies. It's worth what other people are willing to give you for it. I'd wager that the value of a fresh loaf of bread has held its value more consistently than an ounce of gold over 10 years. The only advantages gold has over bitcoin is that gold has some useful chemical properties (which probably have little to do with its current price) and it has a lot longer history as being used as currency, which I think is the real reason we value gold today. It is valued because it is valued.
IIRC correctly gold has been a popular currency because it has properties that allow it to fulfill the functions of a currency quite easily - it's uniform size and weight and overall geographic availability lend nicely to being a unit of account, while its natural scarcity lends itself to being a store of value, and its durability lends itself to both its unit of account and store of value functions.
It's also worth noting that the volatility of gold production has historically played against its function as a store of value, as fluctuations in its price have had impacts on the larger economy.
All of this is to say that the only reason gold has extrinsic value as money - why so many societies have seen it as money - is because it has natural properties that map reasonably well into the needed functions of a currency. It's not unique among natural currencies, rather just a first among equals.
I think this is exactly right, but it also shows why bitcoin is actually a very good candidate for a currency. It has every characteristic that makes gold a good currency, and additional ones as well. In the ways that gold is convenient, bitcoin is more convenient. As far as currencies go, I think that the less intrinsic value it has the better it fulfills its purpose. It is not meant to be hoarded but serve as lubrication for the exchange of goods and services. I could go on, but basically I think bitcoin could be seen as superior to gold as a currency, if its value was as globally accepted. But still, I think it is inferior to the dollar. For a truly stable economy we need to be able to control the value of our currency.
Of course you are right about Gold, it's valuable mostly because it is popular and we've agreed that it is valuable - for a while, aluminum was more valuable than gold, because it is shiny and was scarce. You could argue that aluminum is actually more "useful" than gold. Most things are either valuable because they are scarce (mainstream economics) or because a lot of labor went into it's production (labor theory of value/Marx). But things that are not money seem to need a "practical" use to be able to hold value.
Interesting fact about gold, for a while private gold possession was banned in the US. So even in that regard it is not a to Bitcoin...
What I'm missing from the article is that Bitcoin often is seen as the "reserve currency" of the cryptocurrency world. Bitcoin might not be superior technology wise, but it is the de facto standard for trading other cryptocurrencies.
The fact that the author knows about Bitcoin means that he will have it before other people. He understands that its value is either infinity or 0 counted in dollars... he just needs to change the direction
Why there is so much negative PR going around about Bitcoin suddenly? I believe that people like Jamie Dimon trying to lower the price by creating these kind of stories to buy more.
Bitcoin will rise no matter what. Atleast for 5 more years.
... the fact that some geniuses were laughed at does
not imply that all who are laughed at are geniuses.
They laughed at Columbus, they laughed at Fulton,
they laughed at the Wright Brothers. But they also
laughed at Bozo the Clown.
Carl Sagan
If you look at how WSJ treats any subject, particularly bitcoin, you'll see that they are just a media company catering to their paying advertisers/audience. The substance of what they write is often questionable, if not out-right wrong.
With respect to bitcoin, WSJ was slightly curious, then quite suspicious, then outright negative, then cautiously optimistic, then very bullish, then "DO YOU HAVE A BLOCKCHAIN?!", and now reigning in some of their foolish enthusiasm (about how blockchains will revolutionize _everything_).
Like any successful politician, telling different stories at different times will satisfy more people.
Isn't this just an artifact of different writers having differing opinions on Bitcoin? I see no reason why a magazine with N > 1 writers should have a consistent opinion across the board on bitcoins (or anything).
I wish I could report these kinds of newspapers with paywalls. Hacker News should ban these sites. It doesn't make sense to share news nobody can read.
Overall, probably one of the weakest arguments I've heard yet about Bitcoin. Despite the title the author completely failed to show any evidence, let alone the "truth", of how or why Bitcoin was worth ZERO. This is obvious click bait, because the author knows that Bitcoin is trending right now and people considering buying it will open this when doing research.
So the author wins in the ad revenue category, but the point he's trying to make basically sums up to : "Bitcoin is just a craze with no inherent value. Even though it's good money like gold, and people hang on to good money because it has inherent value. People spend bad money because they know it can lose value. But bad money is good because it's well regulated. And even though bitcoin is good money then it's worse then bad money because it's speculative. Gold is also completely speculative but it's been speculative for generations so don't worry about it. Also, Bitcoin takes a lot of electricity to mine. It's no where NEAR the amount of energy that mining and minting a tiny bar of gold takes, but I'm not going to mention that. I didn't really think about that part because I trade gold using Forex, which means that I essentially hold a digital representation of gold and don't actually physically hold any gold except my wife's jewelry. But if the government collapsed, then gold would still have value because it's physical, and digital assets like Bitcoin would be worthless.
According to his bio, James Macintosh (author) has a degree in Philosophy and masters in Psychology. Probably not the best basis for in-depth Bitcoin analysis/advice. #justsaying
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[ 2.8 ms ] story [ 112 ms ] threadThat's WAY better than a bank wire, and even better than the increasingly effective service that Transferwise provides. It's also beneficial to at least one party because no bank can reverse the transaction.
http://archive.is/uUnGp
1) Gresham's law: bad money drives out good
2) Bitcoin is good money (deflationary, holds its value)
3) National currencies are bad money (inflationary)
4) People prefer to "hoard" good bitcoin and spend bad national currencies
(So far, so good)
5) Therefore, since people prefer to own bitcoin, it has zero value
(Not every new argument has to make sense, I guess.)
(People casually refer to "bad money driving out good" whenever smart investors abandon bad markets, but that's a different dynamic from Gresham's Law proper.)
It's a stupid idea to run a country with a fixed amount of currency - as the economy expands, more currency is needed - either that - or all prices of everything need to adjust because the 'stupid currency' is fixed.
A 'well managed' currency is better than a fixed supply.
Of course - the 'existential risk' is that some political cowboy will 'print money' for political reasons - this is the great problem that fiat always faces.
But this can be avoided.
Most major currencies are very well managed.
Also - remember that they are backed by actual assets - so money is not coming out of nowhere.
Almost all Euros are backed by some kind of quality asset. It's very rational to allow entities to 'trade' some kind of asset for currency at the central bank. This is actually more 'free market' than any kind of fixed currency.
National currencies - irrespective of the quality of their governance, fixed or not - are extremely useful to everyone. They 'spend' that currency because it's what's used to buy stuff.
Household expenditures: mortgage/rent, electricity, groceries, insurance, gas, car payments, cable/internet. Can you use BTC for any of that. Pragmatically - No. BTC is 'pragmatically worthless' to anyone - it has no reason to exist.
BTC is very useful to money launderers, tax evaders, and other people doing illicit things, it's a great currency for the black market. But beyond that, it serves no purpose. It's not a currency and it's a terrible store of value as compared to any of real-estate, gold, most commodities, a 'basked of bonds of equities' or a 'basket of currencies'.
It's a great intellectual exercise, and I think the 'paper value' of BTC will remain quite high for some time, but unless it sinks in as an actual currency of some economy (say, African nations where the currency is garbage), in the long-long-long run there's no reason for it to maintain it's value.
Additionally I work abroad, once I realized how much is was going to cost me to send my salary back home using the traditional banking system, I quickly became a bitcoin enthusiast
No. You can earn the same as inflation in a risk-free investment.
You can earn more by taking a small amount of risk.
Savers are not punished for anything.
A pure deflationary currency should exist to counterbalance inflationary fiat.
In fact I wish a portion of my actual salary was in Bitcoin, so I didn't have to pay exchange fees every month lol
If you're considering a long horizon, then volatility shouldn't bother you too much.
It's not perfect but it's by far the best currency for illicit online transactions.
1. User A holds a publicly visible wallet with 1000 bitcoins in it.
2. User B publicly gives User A 10 bitcoins.
3. User A now holds a publicly visible wallet with 1,010 bitcoins in it.
4. Over the course of a month, User A distributes all 1,010 bitcoins across a thousand new publicly visible wallets, in seemingly random amounts. These wallets are publicly visible, and the transactions are publicly visible.
5. Nobody knows who holds the keys to any of those wallets. Presumably, at least 10 bitcoins worth of money belonging to User B is held in some combination of those wallets, but figuring out which ones belong to User A vs User B suddenly becomes very complicated.
6. This becomes even more complicated if there are more than two users in the scenario. What if there are actually a thousand users that the money is being mixed between?
This is the premise of bitcoin mixer services. It is at least somewhat possible to "anonymize" and "launder" public bitcoin transactions on the public ledger via this method. This is especially true if someone uses multiple mixer services to launder the same money split across a bunch of wallets.
Or at least that's my understanding? I've never actually done it.
Euros are backed by specific classes of assets, and USD is backed by US government debt, and since 2008 a lot of real estate (which was under water for a long time, but coming above water over time).
The US does not just 'print money' and inject it into the economy.
The Fed takes US Gov debt out of the market at market prices, and replaces them with USD of the same value - or the reverse of that.
At least at the 'central bank' level.
Now - when it comes to the notion of 'fractional reserve banking' - that's another issue entirely.
Yes they just “print money” actually they create it electronically, that’s how the government got the money for quantitative easing.
The reserve bank has control over the money supply. They can create more or less, and thereby regulate the inflation rate of a country.
The government is trading money they create, for some type of asset - in the case of QE, it could be government bonds, or other things. i.e. taking bonds 'off the market' and putting currency 'on the market'. Some day it will will reverse.
Ergo - that currency is 'backed by' an asset, i.e. government bonds, or other securities.
Obviously they have to 'create it' somehow in order for it to exist, but it's only created in exchange for assets, which are held by the central bank.
'Money printing' or 'arbitrary money creation' is when governments/central banks create money out of thin air for whatever purpose.
When a government 'prints money' to pay of debt to some other country - that's just 'printing money out of thin air' - the newly minted currency is not 'backed' by anything. This will cause hyperinflation as the value of each 'dollar' is backed by less and less, worth less and less, i.e. failure.
At some point, the Fed will release those QE assets back into the market, and take dollars out of circulation - i.e. it's monetary policy, not just printing willy nilly.
The money is both created from thin air and at the same time connected to the underlying assets in the bond.
I'm leaning towards the opinion that it's more "air" than "matter" in that case, but you could argue that it's somehow reflecting the underlying economy somehow.
A BOND IS A LOAN, A LEGAL OBLIGATION TO REPAY
With 100's of years of financial regulation and legal apparatus and precedence, long-standing laws, process and practices it.
It's a fundamental part of the credit system.
The price of the bond on the the markets will be a function of the coupon rate, and the 'risk' associated with the issuer actually paying back.
That's why bonds can be resold because they are worth something.
PRINTING MONEY AND SPENDING IT ON MANSIONS (or whatever) IS DILUTION
It's just making 'z dollars in circulation' no 'z*n dollars in circulation' backed by the same amount of assets, ergo, each dollar worth less.
I recommend "Investopedia.com" where you can go and look up what a 'bond' is, what a 'stock' is, what 'currency' is, and what 'central banks' do, it's a great resource.
It's definitely increasing the money supply in that case. If the assets are valuated at the correct price is another issue...
Want to own real estate? Then you also need to acquire some currency to pay your property tax bill.
Want to buy food to eat? Even if you pay for the food with some other form of payment, you still need some of the local currency to pay the sales tax on that food.
Want to get compensated for your labor? Even if you want your compensation to be in some other form, you still need some of the local currency so that you can pay your income tax bill.
Want to hire someone to do something? Even if they accept some other form of payment, you still need some of the local currency to pay their payroll tax.
That creates a guaranteed base level of demand for the currency that will never go away, so the currency will always be worth something unless the government collapses or prints too much money.
Thats a price system like at the gas station, right? Sounds good to me.
But 'monetary policy' is a very valuable instrument, in fact, necessary in many occasions, such as deep recession, economic shock, or war.
All prices are already being adjusted all the time - what is the problem?
Greece and Spain right now do not have their own currency. Their monetary policy is dictated by greater powers - like Germany. The Euro is a 'strong currency' - it's the only way a currency union can work. There are very strict rules for how money is created.
When an economy crashes or sinks, sometimes governments want to print some easy money to 'stimulate' the economy, and a weaker currency will help exports.
Also - one 'price' that will not change easily is wages. Powerful, government sector unions will never accept a pay cut. Neither will private citizens really.
But in reality - 'the nations workers' simply are not as productive - and 'everyone needs to take a pay cut'. Not gonna happen.
Instead of 'pay cuts' companies and govs just 'hire less' hurting the economy even more.
Welcome 'monetary policy'. It's a tricky game, but they can inflate away debt, and push wages down a little bit, vis-a-vis other nations - to reflect the new condition of the economy.
Also - war, and existential shock. Monetary policy tools are important then for nations to survive sometimes.
It's a risky thing, and prone to mismanagement and certainly when politicians get their grubby hands on the Central Bank - it usually runs amok. This is the 'historical' reason a lot of people like 'Gold standards' and 'hard money' - because some tin-pot dictator can't dilute their cash.
But intelligently managed currency has elasticity - which helps smooth over bumps.
Is the short answer.
However I think what you need to understand with Bitcoin is that it isn't a finished product or in its final state. That is one of its strengths.
People are constantly working to improve it. It is literally always under development by the community that uses it. Eventually improvements will be made to improve transaction times, transaction anonymity, efficiency etc...
But even without those improvements Bitcoin is being adopted quite seriously by some significant institutions as a means of facilitating transactions. One of the largest retailers in South Africa (where I happen to live), is experimenting with accepting Bitcoin at the till.
So I suppose I am not here to preach the gospel that Bitcoin is the future and is perfect, but I would be careful of declaring absolutes like 'unless it sinks in as an actual currency of some economy ... there's no reason for it to maintain it's value.'
Mainly because most people that make those predictions (re. Bitcoin) have had to eat their own words.
Yes, before the internet and computers, changing the price of a product is a huge overhead. Today, it doesn't necessarily have to be.
Sure, the price has been going up like crazy, and you might hold on to them to go "to the moon". But if it crashes, the value can go to zero - bitcoin has no "intrinsic value" unlike gold, its value is only defined by what you can get for it. In that sense, yes, it definitely has a non-zero value now. But it might crash, be outlawed, etc. tomorrow and you can loose everything.
(Another point is that "value" is notoriously ill-defined. Price? Trade value? Use value? Something else?)
It's also worth noting that the volatility of gold production has historically played against its function as a store of value, as fluctuations in its price have had impacts on the larger economy.
All of this is to say that the only reason gold has extrinsic value as money - why so many societies have seen it as money - is because it has natural properties that map reasonably well into the needed functions of a currency. It's not unique among natural currencies, rather just a first among equals.
Interesting fact about gold, for a while private gold possession was banned in the US. So even in that regard it is not a to Bitcoin...
Remember, when WSJ and analyst says to do something, do the opposite.
Thats not true, you need electricity (and other resources) to: - mine gold - build storage facilities to store gold - transport the gold
Ethereum and NEO for example enable developers to build smart contracts (Dapps) with real-life use cases.
Musiccoin tries to solve unfair royalty payouts in the music industry.
There are so many new initiatived, and I'm convinced we are only at the very start of this blockchain revolution.
Bitcoin will rise no matter what. Atleast for 5 more years.
1. New and interesting thing that the hardcore people use
2. Hopeful stories about the potential
3. Growing excitement as adoption reaches into "real" things
4. Doubt stories
5. Attack stories
6. Non-story
With respect to bitcoin, WSJ was slightly curious, then quite suspicious, then outright negative, then cautiously optimistic, then very bullish, then "DO YOU HAVE A BLOCKCHAIN?!", and now reigning in some of their foolish enthusiasm (about how blockchains will revolutionize _everything_).
Like any successful politician, telling different stories at different times will satisfy more people.
> So is a single bitcoin worth $500,000, $5,000, $500 or $0? I’m inclined to say $0
> The digital currency’s value depends on it becoming digital gold—or on criminals
This is opinion (aka bu*hit).
So the author wins in the ad revenue category, but the point he's trying to make basically sums up to : "Bitcoin is just a craze with no inherent value. Even though it's good money like gold, and people hang on to good money because it has inherent value. People spend bad money because they know it can lose value. But bad money is good because it's well regulated. And even though bitcoin is good money then it's worse then bad money because it's speculative. Gold is also completely speculative but it's been speculative for generations so don't worry about it. Also, Bitcoin takes a lot of electricity to mine. It's no where NEAR the amount of energy that mining and minting a tiny bar of gold takes, but I'm not going to mention that. I didn't really think about that part because I trade gold using Forex, which means that I essentially hold a digital representation of gold and don't actually physically hold any gold except my wife's jewelry. But if the government collapsed, then gold would still have value because it's physical, and digital assets like Bitcoin would be worthless.
VERY convincing.